Trump aims to make a theoretical profit of $3 billion from the IPO of his social network. international

The path is clear for the IPO of Donald Trump’s social network Truth Social. The shareholders’ meeting of the company Digital World Acquisition Corp (DWAC) this Friday approved the merger with Trump Media & Technology Group (TMTG), the company that owns Truth Social. With the price skyrocketing, this means that Trump will, at least on paper, get a hidden profit of about $3 billion, although it seems very difficult for him to make this effective. The shares will be listed under the code DJT, the initials of the former president.

The success of the operation comes as time is running out for the former president to post $454 million bail to face responsibility in the civil fraud case in which he was convicted in New York. Trump assured on his social networks this Friday that he has about 500 million dollars in cash. He has also said that he plans to use them in his campaign to defeat Joe Biden in the presidential election. In fact, so far, instead of putting money from his own pocket into the campaign, he has used millions of dollars in donations from his supporters to pay his legal expenses for various civil and criminal proceedings. Of which he is the subject.

The merger prospectus indicates that former President Trump will own 78.75 million shares, controlling at least 58.1% of the voting rights of the merged company New Digital World. At the current price of about $38 per share, that package would be valued at $3 billion. The IPO could take effect next week, but Trump has a commitment not to sell his shares for six months. It will be important to see whether the price remains intact till then or not.

Taking the current price of around $5,000 million as a reference, the valuation that the market gives to the company is beyond logic and it is very difficult for the former President to materialize those profits. DWAC has become a meme stock, driven by impulse rather than the company’s economic fundamentals. The adjustment began this Friday and shares fell more than 11%.

The transaction prospectus last month revealed that Trump’s social network company has minimal revenues and large losses. TMTG’s turnover between January and September 2023 was only $3.4 million, while its losses were $49 million.

TMTG has used bridge financing primarily in the form of convertible notes to build Truth Social. It now wants to use the funds from the merger to boost its growth. The prospectus acknowledges that the Company has historically suffered operating losses and negative cash flows and is expected to continue to do so for the foreseeable future. He says, “TMTG’s ability to be profitable and generate positive cash flow depends on TMTG’s success in growing its user base, platform partners and advertisers.”

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The company recognizes that to be viable it needs to attract Republican voters to its network and recognizes that if Trump loses popularity or new controversies arise that could damage its credibility or people’s use of the platform associated with him. If they harm the desire to do, then the results of the operation will make them angry with it. ,

Trump founded Truth Social after he was expelled from Twitter and Facebook for messages that content moderators at those networks deemed inciting violence in connection with the attack on the Capitol on January 6, 2021. The purchase of Twitter by Elon Musk has allowed Trump to return to the network. The billionaire has given free rein to misinformation on his network, to which many conservative hoax-spreaders have returned.

This loses some of the appeal of Truth, whose main attraction is its exclusive inclusion of the former president’s messages on social networks. The truth never came within the grasp of the general public. The most successful profile Trump has has far fewer followers (6.7 million) than he gained on Twitter and still remains the same (87.5 million) despite not publishing new messages there.

The final pamphlet retains the warnings that appeared in previous drafts, particularly regarding the possibility of Trump going to jail. A section of risk warnings states, “The death, imprisonment or incapacitation of President Trump, or the interruption or limitation of his relationship with TMTG, could adversely affect TMTG’s business.” The company “depends heavily on the popularity and presence of President Trump,” who is its head and its main shareholder.

The IPO prospectus also reviews some of Trump’s business examples. The warnings will serve to scare even the most emboldened: “Multiple companies associated with President Trump have declared bankruptcy. There can be no assurance that TMTG will also not go bankrupt,” says one. “Many companies that entered into licensing agreements with President Trump have failed. There can be no assurance that the TMTG will also not fail,” the following cautions. The DJT code was once used by Trump Hotels & Casino Resorts, which went public in 1995. It was declared bankrupt in 2004 and removed from the market.

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