A Truth Social windfall likely won't solve Trump's immediate financial crisis

By Lukas I. Alpert

The former president could reap billions of dollars on paper in the merger of his social-media company, but he wouldn't be able to cash in for at least six months

A vote Friday on whether a merger of Donald Trump's social-media company with a blank-check firm goes through could more than double the former president's net worth on paper, but it seems unlikely that it will solve his immediate financial woes.

The proposed merger of the Trump Media & Technology Group - the operator of Trump's social-media platform, Truth Social - with Digital World Acquisition Corp. (DWAC), a special purpose acquisition company, or SPAC, could result in Trump holding shares in the combined company worth upwards of $3 billion, based on recent share prices.

If the vote passes, the newly merged company - of which Trump would own about 60% - could begin trading under the ticker DJT as early as next week. The valuation of Trump's shares would more than double Trump's current net worth of $2.6 billion, as estimated by Forbes. He also could earn many more shares in the company if the stock price trades above $17.50 for 20 out of 30 days, Securities and Exchange Commission filings show.

But the 77-year-old Trump won't be able to touch any of the new money for at least six months after the deal closes, according to SEC filings detailing the terms of the deal. Nor will he be able to borrow money against the shares, discuss selling them or transfer them in any way during the time frame, known as a lock-up period.

One potential lifeline is that the company's board of directors could issue Trump a waiver to tap into the money, the SEC filings show, although it is unclear how quickly that could happen.

So the potential windfall will likely not immediately help bail Trump out of his most pressing financial problem - coming up with a $454 million bond in order to appeal his conviction in New York State Supreme Court of corporate fraud by deceiving lenders and insurers by routinely misstating the value of his assets.

Barring intervention by the appellate court - Trump has asked that the bond requirement be waived, as it has proven a "practical impossibility" to secure the money - the bill comes due on Monday. The cash crunch threatens Trump with a financial crisis.

If he is unable to come up with the $454 million, New York Attorney General Letitia James, who brought the fraud case, has vowed to begin the process of seizing Trump's assets to pay the bill. The proceeds of the Truth Social merger would then become a ripe target for James to go after, experts say.

"Bank accounts and debts owed, included the proceeds of a company sale, are far more simple to freeze than, say, Trump's stake in an LLC that owns a building," said Mark Zauderer, a veteran attorney specializing in complex financial litigation.

Many questions also remain about the timing of the merger deal, or whether it will happen at all.

The transaction is already subject to extensive litigation brought by several of the key players involved. Patrick Orlando, who was until recently the chief executive of Digital World Acquisitions and remains a substantial shareholder, has been fighting with Trump in court and has signaled he might not vote in favor of the deal on Friday.

If the vote fails to pass on Friday, Digital World Acquisitions could be forced to liquidate under the terms of its original prospectus, entirely scotching the deal, filings show.

The two companies announced plans to merge in October 2021, but the deal has been slowed by federal investigations into insider-trading allegations. In January, the Department of Justice hit three men, including a former Digital World Acquisitions board member, with criminal charges. The company agreed to pay an $18 million fine as part of a settlement with the SEC.

The company's stock price has been deeply intertwined with Trump's personal brand and political fortunes. Shares in the company are up around 140% since the beginning of the year and have more than doubled since Trump won the New Hampshire primary in late January. Shares shot up even further after the SEC formally signed off on the merger on Feb. 15, although they have since dropped about 20% from their high.

The stock run-up comes even as Trump Media keeps losing money and generated only $3.4 million in revenues in the first nine months of 2023, SEC filings show. If the deal happens and Trump is able to secure a waiver that allows him to sell some publicly traded Digital World Acquisitions stock, it's unclear how the momentum-driven stock price might hold up in the face of such a move.

-Lukas I. Alpert

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03-22-24 0919ET

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