Donald Trump expressed his love for his new social media app, Truth Social, on Saturday, but shareholders were less enthused after a sharp drop in the share price of Digital World Acquisition Corp (DWAC) on Friday. The share price plummeted by nearly 14% following shareholder approval of the merger with Trump Media, the former president’s social media company. This drop could potentially lower the estimated value of Trump’s majority stake in the newly merged company, which was previously estimated at around $3 billion.
The share price of DWAC had reached a 52-week high of $58.72 per share on January 23, but dropped to $44.20 per share as trading opened on Friday ahead of the shareholder vote. The stock closed trading at $36.94 per share, with some recovery to $38.55 per share in after-hours trading. Concerns have been raised about whether Trump Media & Technology Group (TMTG) can generate significant revenue, given TMTG’s reported losses of nearly $50 million and revenue of less than $3.5 million over the first three financial quarters of 2023.
In addition to financial concerns, Trump is facing legal challenges that could impact his ability to capitalize on his stake in Trump Media. He currently faces civil legal judgments exceeding half a billion dollars in New York federal and state courts, along with mounting legal bills from multiple criminal prosecutions. Trump’s lawyers have indicated that he does not have the funds to obtain an appeal bond to secure a $454 million fraud judgment, which could prevent the New York Attorney General’s Office from collecting on that award for now.
Despite these legal challenges, Trump will hold a majority stake in Trump Media and will be blocked from selling shares in the company for six months under the terms of the merger. However, the new board of directors, which will include his son Donald Trump Jr. and other allies, could vote to lift this restriction, potentially allowing Trump to sell off shares to cover his legal expenses sooner than anticipated. This could result in a drop in Trump Media’s share price, leading to further stock sales by shareholders and potentially depressing share prices.
When Trump Media begins trading on the NASDAQ stock market, it will use the ticker symbol DJT, which was previously used for Trump Hotels & Casino Resorts, a publicly traded company that filed for bankruptcy protection in 2004. This history of financial instability and bankruptcy in a prior Trump-related company may raise concerns among investors about the future performance of Trump Media. Shareholders will be closely monitoring the company’s financial performance, legal challenges, and potential impact on share prices in the coming weeks.
