Donald Trump considers a potential $4 billion boost in stock value amid accumulating legal expenses
Former President Donald Trump has faced financial challenges this year, with two separate court orders demanding a total payment of about $540 million within a month. While this financial strain has raised concerns about the impact on his campaign funds, a less discussed aspect is the notable surge in a stock associated with Trump Media & Technology Group, the operator of the Truth Social platform where he regularly posts. This rally has resulted in a potential windfall of nearly $4 billion for Trump.
The surge is linked to a complex financial transaction known as a de-SPAC or blank-check deal. In this scenario, Truth Social’s owner merges with a publicly traded company, Digital World Acquisition Corp (DWAC). The anticipation of this merger has driven DWAC’s shares up by 161% this year. If the merger is approved in the upcoming shareholder vote, Trump’s stake in DWAC, currently valued at $3.6 billion, could potentially increase by an additional $1.3 billion based on certain performance targets.
Despite skepticism about the valuation of a social media company with limited revenue and user base compared to its competitors, DWAC became a focal point for retail investors and momentum traders amid Trump’s political resurgence. The stock saw a rapid 200% surge in just six days.
While this windfall could cover Trump’s legal fees and penalties, including those related to the ongoing appeal of a $454 million civil fraud verdict in New York, there are complexities. Trump may need to wait at least five months before selling shares, and the timing of share sales could impact the stock’s performance. Additionally, Trump’s ability to secure loans against the locked-up shares remains uncertain.
The potential success of Trump Media and Truth Social in the long term also raises questions, given the company’s financial struggles, with a loss of $49 million and revenue of $3.4 million in the nine months through September. The completion of the deal faces scrutiny, having navigated challenges over two years, including investigations by the Justice Department and the SEC.
The future share price and Trump’s windfall will likely be influenced by his political success, as Trump Media aims to challenge liberal media and big tech companies. Shareholders, predominantly Trump supporters, may choose to retain their shares, hoping for alignment with Trump’s campaign message and a commitment to Truth Social.
Overall, while the potential windfall from DWAC’s rally could provide financial relief for Trump, uncertainties and challenges persist in the financial and political landscape surrounding the deal.
