Trump plan for new media venture gets investors' thumbs up
“Whether that’s going to be sustainable in the long run, that’s very uncertain.”
Mogharabi said next year’s mid-term elections could be pivotal in whether the social media platform succeeds.
“A lot of Trump supporters would probably go on there. Even more so in 2024, if Trump actually decides to run for president. Those types of future events could actually attract more users.”
For now, the deal is attracting stock traders. Shares of Digital World Acquisition soared $35.34, or 357%, to $45.50, and changed hands more than 475 million times. That compares with average trading volume of about 11 million shares for Twitter, which trade at around $65.
Digital World Acquisition, based in Miami, is a special-purpose acquisition company, or SPAC. Such publicly traded companies are designed to list the shares of a private company more quickly than a traditional initial public offering. In practice, that means the SPAC acquires a private firm and then changes its name and other details to those of the acquired firm.
“It’s been many, many months since there’s been a SPAC merger greeted with this amount of enthusiasm,” said Jay Ritter, a professor at the University of Florida who specializes in initial public offerings.
A SPAC pays for an acquisition with cash from its own initial public offering. DWA completed its initial public offering on Sept. 8. DWA said it has raised roughly $293 million in cash, which it will use to grow TMTG’s ventures.
The enthusiasm from investors came even though the SPAC deal was unusual in several ways. Announcements of such deals typically are accompanied by the actual merger agreement and a presentation to investors full of numbers and data.
In this one, the merger agreement was not there. And the “Company Overview” of TMTG on its website is light on details about its structure and finances.
“I don’t know enough to say it’s unprecedented, but it’s weird. Given a lot of things that happen with Trump are not great with details and formalities, it’s perhaps not surprising, but it’s not the norm in SPACs,” said Michael Ohlrogge, an assistant professor of law at New York University who researches SPACs.
Until the deal is completed, TMTG would not have access to the cash raised by the SPAC. And without additional details from the companies, it’s unclear what Trump’s role will be and how much he’ll be compensated.
The deal has an initial enterprise value, which measures total debts and assets, of $875 million, according to Wednesday's announcement. Experts say it could take up to six months for the deal to close.
Digital World Acqusition is currently run by CEO Patrick Orlando, a Miami-based founder of the Benessere Investment Group. He owns 18% of Digital World’s stock, according to a recent regulatory filing.
Orlando has experience taking at least three SPACs public. One company, Yunhong International, had planned to buy a marketer of “carbon neutral” fuel cells and batteries, but a press release issued last month said the deal had been canceled without giving a reason.
Orlando declined to comment about Trump’s potential role in the new company to The Associated Press on Thursday, pointing the public statements, which provide no detail.
The last time Trump ran a publicly traded company, it didn’t end up well for investors. His casino company, Trump Entertainment Resorts, lost hundreds of millions of dollars over more than a dozen years and filed for bankruptcy several times, socking shareholders with big losses. Trump fared better. He took in $82 million in fees, salary and bonuses over the same period, according to Fortune magazine.