Donald Trump’s recent endorsement of the social media app Truth Social may have been met with enthusiasm from his supporters, but shareholders in the company that owns the app, Digital World Acquisition Corp. (DWAC), were less than impressed. Following the approval of a merger with Trump’s social media company, DWAC saw its share price plummet by nearly 14% in just a few hours. This sharp drop in price could have significant implications for the future of Trump Media, the newly merged company, and potentially impact Trump’s majority stake in the venture.
One of the main reasons for the decline in DWAC’s stock price could be concerns about Trump Media’s ability to generate significant revenue. Trump Media & Technology Group (TMTG), the company being merged with DWAC, reported substantial losses of nearly $50 million over the first three financial quarters of 2023, with minimal revenue to offset these losses. This lackluster financial performance raises questions about the long-term sustainability of the company and its prospects for profitability.
Adding to the uncertainty surrounding Trump Media is Trump’s mounting legal troubles. With civil legal judgments totaling over a half-billion dollars in federal and state courts, as well as significant legal bills from ongoing cases and criminal prosecutions, Trump’s financial situation is less than stable. His inability to post a bond to secure a $454 million fraud judgment further complicates matters and raises doubts about his ability to fund his legal defense.
Trump’s majority stake in Trump Media, which stands at 58%, could be at risk if the company’s share price continues to decline. While a temporary restriction prevents Trump from selling his shares for six months post-merger, the board of directors, which includes his son Donald Trump Jr. and other allies, could vote to lift this restriction sooner. This could lead to a sell-off of shares by Trump to cover his mounting legal costs, causing a drop in share prices and potentially triggering further sales by other shareholders.
The use of the ticker symbol DJT for Trump Media when it begins trading on the NASDAQ stock market raises concerns given its association with Trump’s past failures. Trump Hotels & Casino Resorts, which also used the DJT ticker, faced financial difficulties and ultimately filed for bankruptcy protection in 2004. The negative connotations linked to the DJT symbol could impact investor confidence in Trump Media, especially if the company struggles to demonstrate profitability in the coming months.
Trump’s endorsement of Truth Social and the merger with DWAC have raised concerns among shareholders and investors about the future of Trump Media. With uncertainties surrounding the company’s revenue potential, Trump’s legal challenges, and the potential impact on share prices, the road ahead for Trump Media remains uncertain. As the company prepares to go public and face the scrutiny of the stock market, only time will tell whether Trump’s latest venture will be a success or another financial setback.
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