Investors have given the green light for the parent company of Truth Social, known as Trump Media, to go public in a deal that could see former President Donald Trump earning billions. The merger with Digital World Acquisition Corp., long-awaited, is expected to close as early as next week, marking a significant step forward for the company.
Upon completion of the merger, the company will be rebranded as Trump Media & Technology Group and will be traded under the ticker symbol DJT, taken from Trump’s initials. The newly formed entity will take ownership of Truth Social, a social media platform that has been struggling to attract users.
Challenges Ahead for Trump
While this approval marks a positive development for Trump, financial experts warn that the merger may not immediately resolve his financial challenges. Trump’s stake in the new company is estimated at over $3 billion, but he may not be able to cash in on it right away due to various practical, financial, and legal hurdles.
Financial and Legal Hurdles
Matthew Kennedy, a senior IPO market strategist at Renaissance Capital, emphasized that Trump faces a pressing deadline to post a $464 million bond in New York’s civil fraud case against him. Failure to meet this deadline could result in the seizure of his assets, including his golf course and private estate north of Manhattan.
Lock-up Period and Collateral Concerns
Even if Trump were to find a buyer for his shares, he may be restricted from selling or pledging the stock immediately. Shareholders, including Trump himself, have agreed to a six-month lock-up period to maintain stability in the company’s leadership and governance. This agreement prohibits them from selling, lending, or pledging their stock during this time, making it difficult for Trump to use his shares to secure cash.
Furthermore, additional lock-up restrictions in an amended charter could further complicate matters for Trump. Amending the charter would require disclosure and could discourage potential buyers of the stock.
While the merger approval represents a significant milestone for Trump Media, it may not resolve Trump’s immediate financial challenges. The company’s overvaluation, declining user base, and lock-up restrictions pose significant hurdles for Trump to monetize his stake and address his pressing financial obligations. As the merger progresses, attention will be focused on Trump’s next steps to navigate these complex financial and legal obstacles.
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