Trump’s Truth Social payday won’t come fast enough

Donald Trump is set to receive a windfall from a merger involving his social media company, but it won’t come in time to solve his pressing financial needs — and selling later might diminish the value of the company, for good measure.

On Friday, shareholders with Digital World Acquisition Company approved a merger with Trump Media & Technology Group, the parent company of Trump’s struggling social media platform Truth Social, essentially a far-right copycat of the site formerly known as Twitter whose main draw is Trump’s own account. The deal will allow the company to trade on the stock market under the ticker “DJT,” for Trump’s initials. 

The merger is great for Trump, although it’s hard to justify using any kind of normal business logic.

In a nutshell: Trump launched a mediocre social media company as a majority owner. Then, an investment group with a history of disclosure issues merged with this company, presumably giving it access to its funds. That’s jacked up the value of Trump’s media company and, consequently, the net worth of its primary investor, Donald Trump, who holds approximately a 60% stake. Early reports suggest the deal could make Trump — on paper — worth around another $3 billion. 

Trump could really use the money right now, since he’s been unable to raise the money to pay off the $454 million judgment he owes after losing his civil fraud case in New York. 

But, unfortunately for him, he can’t get it just yet. Due to what’s called a “lock-up” provision — a rule that prevents stockholders from selling stock for a period of time after their companies go public — Trump won’t be able to withdraw any capital for six months unless he’s given some sort of waiver.

And even if Trump were to get that waiver, the prospect of him selling all his shares could diminish the value of the company he just formed with DWAC, as Vaughn Hillyard explained on MSNBC Friday. (Though one wonders if Trump may try to use the new deal as leverage to get a more favorable loan he could use to pay down his debts).

There are also multiple lawsuits making their way through court from former Truth Social investors and a former executive from DWAC that could still upend the merger. 

Digital World Acquisition Company is what’s known as a “SPAC,” or special acquisition company. The U.S. Securities and Exchange Commission explains that these companies, which are sometimes called “blank check companies,” are “a popular vehicle for various transactions, including transitioning a company from a private company to a publicly traded company.”

The SEC says:

Unlike an operating company that becomes public through a traditional IPO, however, a SPAC is a shell company when it becomes public. This means that it does not have an underlying operating business and does not have assets other than cash and limited investments, including the proceeds from the IPO.

In recent years, SPACs have been promoted as tools to help struggling media companies hike up their value through their association with wealthy financiers. This, for example, was what happened when BuzzFeed went public through a SPAC in late 2021, a move that was intended to put the company in better financial standing but actually resulted in lawsuits and general chaos for the news outlet. In fact, SPACs have become less popular of late, amid higher interest rates and heightened scrutiny from the SEC.

Trump doesn’t seem worried about the obstacles this new merger might meet in the future, though. He’s desperate for cash, and this deal offers him a lifeline. His problem is that he can’t use it as urgently as he needs. It’s as though someone saw him drowning and threw him an uninflated life raft. In theory it could be useful, but not right now, when he needs it the most.