These gains can be hard to sustain in the Reddit-fueled world of trading and extravagant SPAC hype. But the money betting on a Trump media conglomerate marks a sharp turnaround for a post-presidency that hasn’t been kind to the billionaire’s business empire.
The Washington hotel, first listed on the marketplace in 2019, remains for sale. Meanwhile, the tower at Midtown Manhattan that bears his name is growing vacant. The Trump Organization’s chief financial officer was indicted for tax fraud this summer. Trump’s net worth has declined by about $500 million since he entered the White House, with the pandemic and fallout from January’s Capitol riot delivering added blows to his business interests.
Learn more: Trump Fortune Drops to $2.3 Billon as Covid Riots Hit Empire
The arrival of the social media outlet Trump has teased for some time, is now. The valuation is not without merit. There are several reasons for concern. Truth Social, the social media platform that will launch the venture’s first product, won’t be released publicly until several months later. There are technical problems. The Truth Social page was compromised to appear as if Trump had shared a picture of a pig defecating.
It’s also unclear how Trump plans to build a social-media platform on the scale of Twitter over the next few months, let alone a streaming service, which is the next phase of Trump Media’s plans, according to the press release announcing the company. Even by SPAC standards, this statement had very few numbers.
“We have no financials. There is no plan for our business. We don’t know how they got to the valuation. We have no information,” said Kristi Marvin, chief executive of research firm SPAC Insider. “That’s the fundamental problem.”
Representatives for Trump and Trump Media didn’t respond to requests for comment.
The business has ambitious plans that also include a potential “tech stack” to compete with Amazon.com Inc.’s AWS and Google’s Cloud, among others, according to a presentation on Trump Media’s website. As of now, Digital World’s board is light on members with media experience. Patrick Orlando, the company’s chief executive, was an ex-derivatives trader at Deutsche Bank AG. Before embracing SPACs, he co-founded and ran a sugar-trading business, Benessere Capital.
Retail investors seem to have no concerns so far. Shares of Digital World Acquisition Corp., the shell company merging with Trump’s new venture to take it public, closed Friday at $94.20 — up from $9.96 before the deal was announced Wednesday. It’s also an increase of more than 800% from a $10 offering price that’s typically used in a SPAC merger agreement.
According to the press release, the company’s initial enterprise value would be $875 million. Assuming that calculation used a $10 a share offering price and the $293 million Digital World has in trust, the SPAC’s owners will get about 42% of the combined company after accounting for shares the sponsor receives if a deal gets done.
Trump as well any other partners in Trump Media have 58%. That stake is worth nearly $4.8 billion, based on Digital World’s last price. The whole enterprise is being valued by the market at about $8.2 billion, compared with Twitter Inc.’s almost $50 billion equity valuation.
With the new media company’s valuation dwarfing the $875 million enterprise value agreed to by Trump, he may have been able to negotiate a sweeter deal. Before shareholders can vote, the terms of this agreement must be made more transparent and could change. That’s likely to happen in months.
Most of Trump’s current wealth is tied to the Trump Organization, a sprawling real estate business that has been hurt by the pandemic and legal troubles. There’s also at least $590 million in debt coming due in the next four years linked to the company’s properties, more than half of which is personally guaranteed by Trump.
The company won a victory in April when Vornado Realty Trust, its partner in the two skyscrapers, refinanced debt related to San Francisco’s tower. This brought $617 million home to its owners. The Trump Organization also appears to be closing in on a sale of Washington’s Trump International Hotel, which was a hotspot for political allies, lobbyists and conservative media figures during his administration.
“We are one of the most under-leveraged real estate companies in the country relative to our assets,” Trump’s son Eric Trump said at the time of the Vornado deal. His brother Donald Trump Jr. and he have led the Trump Organization on paper. After his arrest, Allen Weisselberg was made Chief Financial Officer. New York State also brought 15 counts against the company.
Trump hasn’t signaled that he’ll return to the Trump Organization. He is now focusing on the Republican party’s dominance and on his media project which would allow him to communicate with supporters and raise funds after being banned from Twitter and Facebook. This would be crucial if he is elected to a second term.
Trump boasted a wealth of over $10 billion when he first ran for President. Trump may be closer now that he is experiencing a retail trading frenzy.