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Legal Hurdles Loom as Trump Media Merger Approaches Pivotal Vote

 |  March 21, 2024

Former US President Donald Trump’s financial fortunes are poised for a significant upswing, with an anticipated $3.4 billion increase in wealth if a crucial shareholder vote scheduled for Friday clears the path for the flotation of his Trump Media business.

The forthcoming merger between Trump Media & Technology Group, the operator of the Truth Social tech platform, and a special purpose acquisition company (Spac) named Digital World Acquisition, is at the heart of this potential windfall. However, the merger process has hit a snag, with Digital World suing sponsor ARC Global Investments over efforts to delay the deal, underscoring the complexity surrounding the impending vote.

Despite the legal tussle, if the merger successfully proceeds and Trump Media goes public as early as next week, the former president will face a restriction on cashing in his newfound wealth. A clause within the merger document stipulates a six-month lock-up period for major shareholders, preventing immediate liquidation of stock holdings.

Trump’s financial landscape has been under scrutiny, especially in the face of mounting legal challenges. A recent ruling by a New York judge ordered Trump to pay $454 million in connection with a civil fraud case, alleging property value manipulation for favorable loan and insurance terms. Trump, vehemently denying any wrongdoing, has labeled the case a “witch-hunt” and intends to appeal the judgment. The deadline for securing a bond against his assets to guarantee payment of the $454 million looms, yet Trump’s legal team has encountered significant hurdles, with 30 surety companies reportedly rejecting their requests.

Spacs, such as Digital World Acquisition, typically raise funds through a stock market flotation before merging with or acquiring an existing company—in this instance, Trump Media. Upon completion of the merger, the newly combined entity will trade under a stock market ticker comprising Trump’s initials, DJT.

Trump’s ownership in the post-merger company amounts to just under 79 million shares. Based on Digital World’s recent closing share price of $42.90, Trump’s stake in the merged business could value approximately $3.4 billion. However, the realization of this windfall hinges on Trump Media’s ability to sustain its market valuation post-flotation, despite its reported modest financial performance. Financial disclosures from last year revealed Trump Media’s $31.6 million loss since its 2021 launch, with sales totaling less than $5 million.

Source: The Guardian