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The fact that Donald Trump is the one behind this prank means that investors in his soon-to-be public media company will instead make political contributions to his campaign or to Trump’s legal defense fund. This means you may end up donating. This scheme is unfolding in the open and securities regulators can’t do anything about it.
The company in question is Digital World Acquisition, a SPAC (special acquisition purpose company) formed three years ago. The company raised nearly $300 million in an initial public offering in 2021 with the purpose of acquiring another company. The company Digital World has decided to acquire is Trump Media & Technology Group, a two-year-old startup with 36 employees whose “first” product will be Trump’s, according to a securities filing. Truth Social is the answer to Twitter.
Digital World’s stock is now valued at more than $5 billion after years of hold-up, when the company finally received Securities and Exchange Commission approval and shareholder approval to complete its acquisition of Trump Media. Investors, and perhaps some Trump fans, excited to own a piece of a company with his name on it, bought up Digital World stock last week. If the two companies merge this week, as expected, the digital world will become Trump Media, stock market valuations and all.
Digital World’s pre-merger bubbliness made it what was known as a “meme” stock during the stay-at-home pandemic trading era. The reason the stock prices of companies like GameStop and AMC Entertainment soared and eventually crashed was because Internet traders who participated in Red Bull raised their stock prices and then sold them, changing the fundamental value of the companies that issued them. Not because I did it.
But in the case of early meme stocks, companies played little, if any, role in driving stock activity. They were simply on a roller coaster ride. On the other hand, Trump Media’s public announcements have given investors a lot of scorn, with some even warning against investing alongside Donald Trump.
In Trump Media’s own words, through its filing, the company “seeks to build a media and technology powerhouse that rivals the Liberal Media Consortium and promotes freedom of expression.” . The key word here is “aspirations.” So far, Truth Social has fallen short. As mentioned above, so far, its sales are small, the number of “signups” for him is just under 9 million, but this number is both meaningless and extremely small. The company itself doesn’t seem too impressed. The report states that “fixating on traditional key performance indicators such as registrations, average revenue per user, ad impressions, and pricing can draw focus away from strategic assessments of business progress and growth. “There is,” he points out.
Translating the word salad of finance, Truth Social doesn’t make much sense so far. Please ignore our lack of detail.
Trump, of course, has a long and checkered business track record. SEC disclosure rules require Trump Media to detail Trump’s failures, warning that the investment could also fail. The list is long and the language is terrible. “The Trump Taj Mahal, which was built and owned by President Trump, filed for Chapter 11 bankruptcy in 1991. Trump Plaza, Trump Castle, and the Plaza Hotel, which were owned by President Trump at the time, also filed for Chapter 11 bankruptcy in 1992.” Trump’s other business failures followed: Trump Entertainment Resorts, Trump Shuttle, Trump University, Trump Vodka, and Trump. – Research the names of mortgages and GoTrump.com (travel site). An example of President Trump losing money on someone else reads: “Trump Steaks, a brand of steaks and other meats founded by President Trump in 2007, was discontinued two months after its launch.” It concludes with this remark. There is no guarantee that… [Trump Media’s] The performance will exceed that of those entities. ”
Another risk facing Trump Media investors is that they may sell off their namesake stocks to pay for his legal fees. A lot was said last week about the potential benefits President Trump would get from the deal. Mr. Trump owns about 58% of the company’s stock (valued at more than $3 billion at last week’s stock price), so in theory Mr. It could be used to finance $454 million in bonds owed to the state. He would need to impose a customary six-month stock lockup on Trump Media’s management and board, which could easily happen because he controls both. be. However, if a large number of shares are sold, the stock price is likely to plummet. (Already, Digital World stock is down 14% on Friday.) And despite speculation to the contrary, it’s hard to believe he could borrow using Trump Media’s flimsy stock as collateral. sea bream.
Investors who continue to support Mr. Trump cannot say they were not warned.
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