Trump’s Truth Social merger deal wins key approval by SEC
The Securities and Exchange Commission has approved the merger proposal of former president Donald Trump’s media start-up with a special purpose acquisition company, a critical step for a longdelayed deal that would make the owner of Trump’s website Truth Social a publicly traded company and unlock $300 million in investor funds.
Digital World Acquisition, the SPAC that first launched the merger for Trump Media and Technology Group in 2021, said in an SEC filing late Wednesday that the SEC had signed off on its registration statement and that Digital World would announce a shareholder meeting within two days to vote on the merger’s adoption. Digital World shares climbed Thursday morning, to about $50.
The approval is a victory for Trump, who will hold more than 78 million shares in the post-merger company, a filing shows — a stake that, at current prices, would be worth nearly $4 billion. Trump, who would own between 58 and 69 percent of the company, and other investors could earn tens of millions more shares per a provision, known as an “earnout,” tied to the stock’s performance, a filing said.
Jay Ritter, a finance professor at the University of Florida, said the windfall is “paper wealth … with the emphasis on ‘paper,’ since his [Trump Media] shares cannot currently be sold.”
Trump Media’s key stockholders, including Trump and its management team, agreed to a common financial provision, known as a “lockup” period, that prevents them from selling shares for six months after the merger unless Digital World waives the agreement, according to a Digital World filing. If the merger occurs in April, for instance, Trump would not be able to sell his shares until October, at which point their value may have changed considerably.
Ritter said that the merged company’s valuation — roughly $9 billion, based on Digital World’s current price — is out of sync with the Trump company’s financial performance. Trump Media generated $3.4 million in revenue and lost $49 million during the first nine months of 2023, Digital World said in a recent SEC filing.
Trump Media is “a money-losing company that generates less than $5 million per year,” Ritter said. Digital World, he said, “a classic meme stock, whose price is totally unrelated to the underlying fundamentals.”
Trump Media’s chief executive, the former Republican congressman Devin Nunes, said in a statement late Wednesday that the company aimed
“to accelerate our work to build a free speech highway outside the stifling stranglehold of Big Tech.”
But the merger would also open the company to the scrutiny and uncertainty of public markets, where investors could buy and sell shares based on the performance of Truth Social, its sole product. Though it remains Trump’s main online megaphone, the site has struggled to build a user base that would compete with the social media giants Trump initially said it would overtake, including Facebook and X, formerly called Twitter.
Several Trump allies will be nominated to the postmerger company’s board, a filing shows, including Donald Trump Jr., Trump’s oldest son; Robert E. Lighthizer, Trump’s former trade representative; Linda McMahon, his former administrator of the Small Business Administration; and Kash Patel, a former Nunes aide who served on Trump’s National Security Council.
The merger’s completion would require Digital
World to pay an $18 million penalty to the SEC, under a settlement announced last summer, to resolve charges that it had misled investors and violated antifraud provisions regarding its initial merger plans.
The deal is expected to easily win shareholder approval, given the likelihood that share prices will rise after the merger.