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Trump Is in Line for a $3.5 Billion Windfall From Stake in Truth Social
Amrith Ramkumar
Donald Trump's supporters are pushing to hand him a nearly $3.5 billion windfall by driving up the value of his also-ran social-media platform,
which is on the cusp of getting approval to list on the stock market.
Trump's winning lottery ticket would come from Truth Social, the
social-media platform he launched in 2021. After a twisted path that
included tens of millions of dollars in losses and insider-trading
convictions, the shell company taking Truth Social public became the
market's latest meme stock. Trump's supporters banded together to push up
the stock, valuing Truth Social to a staggering $6 billion.
Truth Social could go public as soon as next week, but the deal still
needs to be approved by shareholders. Even if that happens, Trump must
hold his shares for six months.
Truth Social was created by Trump when he was bounced from the major social-media platforms. Since the presidential candidate was reinstated by
and X, formerly known as Twitter, Truth Social has instead become a
potential huge paycheck.
Truth Social's parent is set to go public by combining with a
special-purpose acquisition company, or SPAC. Its shareholders, nearly all Trump supporters, are expected to approve the merger Friday morning.
Trump's company could replace the shell company in the stock market as
soon as Monday. The new ticker would be DJT, Trump's initials.
If the deal goes through, Trump's $3.5 billion windfall could ease his financial pressure and boost his political campaign.
The deal is as stunning as it is unusual. Truth Social was created by
Trump after he was bounced off other social-media platforms. The platform
has failed to catch on with users and its financial performance has been dismal. The platform has logged about $5 million in sales since its launch three years ago and burned through the roughly $40 million it raised from convertible notes.
That hasn't mattered as long as shares of , the SPAC aiming to merge with
Truth Social, are soaring. The stock rose 18% to nearly $43 Wednesday,
implying a valuation of roughly $6 billion for Truth Social. Trump would
own about 60% of the public company.
"There seems to be an unwritten agreement between tens of thousands of
traders that the more political momentum Trump has, the more the stock
should trade higher," said Julian Klymochko, who manages a SPAC-focused
fund at Accelerate Financial Technologies. "It's more of a political
statement and a quasi betting tool on the election."
The potential windfall comes at a crucial time for Trump. On Monday, Trump faces a deadline to obtain a bond to guarantee payment of a $454 million civil-fraud judgment against him. His campaign is lagging behind President Biden's in cash, weighed down in part by Trump's legal bills.
The outcome of the vote and Trump's ultimate payoff are still uncertain. Friday's vote could still be postponed, though it is in the financial
interest of everyone involved to approve the deal. The company has
previously struggled to organize to get the army of individual investors
to vote on other decisions that were in their interest.
Trump would have to hold the shares for six months before selling, meaning
he can't touch the cash until the end of September. He could request a
waiver to sell his stake or borrow against it, regulatory filings show. It
is unclear whether insurers that would back the bond would accept these
shares.
Over the six months, Truth Social could continue to struggle. Though the company could get several hundred million dollars from the deal, it has
failed to become a competitor to bigger platforms.
The expectation that Trump would dump his shares as soon as possible could
also tank the stock price.
The DJT ticker is the same stock symbol that Trump had for his ill-fated
casino company, Trump Hotels and Casino Resorts. The company was valued at nearly $800 million in 1996 before shares collapsed and it filed for
bankruptcy in 2004. Trump's lavish pay package, even as the stock fell,
drew the ire of many investors.
Also called a blank-check firm, a SPAC like Digital World is a shell
company that raises money and trades publicly with the sole intent of
merging with a private firm to take it public. Such deals exploded in 2020
and 2021 as alternatives to traditional initial public offerings for buzzy startups-before essentially disappearing in recent years.
After regulators and investors approve a SPAC deal, the company going
public replaces the SPAC in the stock market.
Write to Amrith Ramkumar at
amrith.ramkumar@wsj.com
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