SEC Greenlights Trump's Social Media Venture with Potential $10 Billion Valuation
The U.S. Securities and Exchange Commission (SEC) has approved Donald Trump’s media and technology company’s merger with a blank-check acquisition entity. This deal currently values the parent company of Trump’s social media app, SEC Truth Social, at up to $10 billion. Despite facing setbacks and a limited user base, investors, many of whom are supporters of the former president, are drawn to the venture due to Trump’s involvement.
The valuation, half of Elon Musk's popular social media company, X, has tripled since January, coinciding with Trump’s increased influence in the Republican presidential nomination race. SEC Trump’s ownership in the combined company is anticipated to be between 58.1% and 69.4%, contingent on investor support.
A regulatory filing by Digital World Acquisition Corp (DWAC.O), the shell vehicle merging with Trump’s company, reveals the possibility of Trump divesting his stake and disengaging from Truth Social based on his presidential bid’s outcome. The SEC-approved filing discloses new information about Truth Social’s parent company, Trump Media & Technology Group, allowing Digital World to proceed with a shareholder vote for the merger.
Investor Sentiment and Valuation Surge
Investors, many of whom are ardent supporters of Trump, appear undeterred by Truth Social’s losses and limited user numbers. The valuation of the deal has surged more than threefold since January, a trend fueled by Trump’s increasing influence in the Republican nomination for president. Trump’s ownership in the combined entity is estimated to range from 58.1% to 69.4%, contingent on investor support for the merger.
Trump's Potential Divestment
A noteworthy aspect of the SEC-approved filing is the possibility of Trump divesting his stake in Truth Social and relinquishing involvement in its management based on the outcome of his bid for the presidency. Digital World Acquisition Corp, the merging entity, disclosed this information in a regulatory filing, indicating the potential for strategic shifts depending on Trump’s political trajectory.
Despite facing challenges, including investigations by the U.S. Department of Justice, changes in leadership, and an $18 million settlement with the SEC, Digital World’s shares surged 16% to $50.49. The potential combined value of the company, assuming no shareholder redemptions, is estimated at $10 billion, with Trump’s stake valued at approximately $4 billion.
New obstacles to the deal’s completion are highlighted, including former Digital World CEO Patrick Orlando, who may impede the deal for additional compensation. TMTG's financial details reveal expenditures of $38.5 million funded through borrowings, and it may issue up to $65 million in convertible notes to manage liquidity.
TMTG reported $3.4 million in revenue for the first nine months of 2023, with an operational loss of $10.6 million. The post-merger board will include prominent figures such as Kash Patel, W. Kyle Green, Linda McMahon, Robert Lighthizer, and Devin Nunes. Trump’s Truth Social, launched after his removal from major platforms, boasts 6.61 million followers, a fraction compared to X’s half-billion monthly users, according to Elon Musk.
Outlook and Future Leadership
With the merger set to proceed, TMTG revealed its post-merger board, including prominent figures such as Kash Patel, W. Kyle Green, Linda McMahon, Robert Lighthizer, and Devin Nunes. This lineup signals a diverse and influential leadership team for the combined entity.
Conclusion
The SEC’s approval of Trump’s social media deal, with a potential valuation of $10 billion, marks a significant milestone in the trajectory of Truth Social and Trump’s foray into the digital landscape. As the merger progresses, the market will keenly observe the impact of this venture on the broader social media landscape and its implications for both Trump’s political ambitions and the business success of Truth Social.