Former President Donald J. Trump’s social media company — and the parent of his favorite digital communications platform, Truth Social — merged with a shell company on Friday, raising Mr. Trump’s wealth by about $3 billion and potentially providing him a fresh source of cash to pay his mounting legal bills.
Investors in the shell entity, Digital World Acquisition Corporation, will now become shareholders of Trump Media & Technology Group, a three-year-old company that could begin trading on the stock market as early as Monday under the stock symbol DJT. The deal will transfer more than $300 million from Digital World’s coffers to Trump Media, a struggling business with little revenue, and allow Truth Social to keep operating.
Based on the $44-per-share price of Digital World just before Friday’s vote was announced, Trump Media will debut with a market value of more than $5 billion. Given that he owns more than 60 percent of the company, Mr. Trump’s net worth will increase by $3 billion — instantly doubling his wealth from the $2.6 billion estimate by Forbes magazine in October.
So far, those gains are on paper, and Mr. Trump is unlikely to be able to quickly turn it into cash because of restrictions in the merger agreement that prevent major shareholders from selling shares for at least six months, or using them as collateral for loans. But because Mr. Trump controls so much of Trump Media, and because his allies are expected to make up a majority of the new board, it’s possible they may waive those restrictions upon his request.
The question of where Mr. Trump can raise cash has become an urgent one because he is on the hook for hundreds of millions of dollars of legal bills tied to the multiple cases against him. Mr. Trump is facing a Monday deadline to cover a $454 million penalty in a civil fraud case brought by the New York State attorney general, which accuses him of greatly inflating the value of his real estate holdings in deals with banks. If Mr. Trump cannot come up with the cash or a bond to cover the penalty while he appeals the ruling, the attorney general’s office could seize some of his properties.
Before Friday’s meeting, the board of Digital World had the ability to waive the six-month restriction on selling shares, but didn’t take any action. That question will now pass to Trump Media’s new seven-member board, which includes Mr. Trump’s eldest son, Donald Trump Jr., and three former members of his administration.
Before the merger closed, Mr. Trump was chairman of Trump Media but neither it nor Digital World disclosed whether he will continue to retain the title. Either way, Mr. Trump will hold enormous sway over the company because of his majority stake of 79 million shares and because his brand is critical to Trump Media’s success.
If Mr. Trump does not ask for, or secure, waivers to sell his shares, he will still come into a lot of cash when the six-month restriction ends. But there is no guarantee that the stock of Trump Media will continue to trade at its current levels. If the share price falls over the coming months, the sizable increase to his net worth could be smaller by September when he is free to sell his shares.
Many of Digital World’s 400,000 shareholders are ordinary investors and fans of Mr. Trump, whose enthusiasm about the former president has propped up the shares for years. But it remains to be seen whether they will hold on to the stock now that the merger is done.
In a statement before the vote, Trump Media said that “the merger will enable Truth Social to enhance and expand our platform.”
With the future of his real estate business in flux because of the ruling in the New York civil fraud case, Trump Media could become one of Mr. Trump’s main moneymakers — and a potential source of conflict should he win the presidency in November. Trump Media currently gets most of its revenue from Truth Social, its flagship platform where several upstart companies advertise their products, targeting Mr. Trump’s supporters and using slogans that are variations on America First or Make America Great Again.
The merger of Digital World and Trump Media, first proposed in October 2021, is one of the more high-profile deals to emerge from a strategy that many companies used to go public that was all the rage during the pandemic. Special purpose acquisition companies like Digital World are speculative investment vehicles set up for the purpose of raising money in an initial public offering and then finding an operating business to buy.
In going public through a SPAC merger, Trump Media is following other so-called alt-right businesses like Rumble, an online video streaming service that caters to right-leaning media personalities, and PublicSquare, which bills itself as an online marketplace for the “patriotic parallel economy.”
Trump Media took in just $3.3 million in advertising revenue on Truth Social during the first nine months of last year, and the company, during that period, incurred a net loss of $49 million.
“It’s unclear to me what is the strategy to building out the platform especially so it may reach a broader advertiser,” said Shannon McGregor, a professor of journalism and media at the University of North Carolina. “There does seem to be a ceiling in these niche markets.”
The merger was almost derailed by a Securities and Exchange Commission investigation into deal talks between the two companies that took place before Digital World’s initial public offering. Securities rules prohibit SPACs from engaging in meaningful merger talks before going public.
But the deal got back on track after Digital World settled with the S.E.C. in July, agreeing to pay an $18 million penalty after the merger was completed and to revise its corporate filings.
After the deal was done on Friday, many shareholders and Trump fans celebrated online. Chad Nedohin, a vocal proponent of the merger on Truth Social, posted a livestream of the shareholder meeting on Rumble. In a chat room, viewers shared their enthusiasm for the deal, with messages such as “Great day to be alive” and “The day is finally here.”
