Yahoo Finance How Trump’s Media Merger Could Provide Him With a Much-Needed $3 Billion Financial Lifeline
As a result of former President Donald Trump’s civil fraud case in New York, which accuses him of substantially inflating his real estate valuations and overall wealth to banks and insurance companies, the former president faces a $454 million penalty.
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Given his current campaign for a second term, the recent merger of his company, Trump Media & Technology Group, with Digital World Acquisition Corp. has the potential to save his financial predicament.
It’s estimated that his net worth will see a $3 billion increase due to this partnership. According to Reuters, Trump has already been losing to Biden in terms of campaign donations. Between large and small contributions, Biden raised $128.7 million as of March 28, 2024, whereas Trump raised only $96.1 million.
SPAC Considerations
This particular case has not been without complications. Digital World was defined as a special purpose acquisition company (SPAC). SPACs do not have commercial operations and are formed with the intent of acquiring or merging with another company.
The Securities and Exchange Commission (SEC), which prohibits SPAC merger talks before their initial public offering (IPO), investigated the proposed activity between the Digital World and Trump Media. Ultimately, the former settled with the SEC for an $18 million penalty.
The closure of the deal has caused shareholders and supporters of Trump to celebrate online, in contrast to Trump Media’s previous performance. Last year, Truth Social, the online platform owned by Trump Media, gained $3.3 million in ad revenue against a net loss of $49 million.
The SPAC merger follows a similar trend to other online platforms like Rumble and PublicSquare — both of which cater to the same demographic as Truth Social.
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The Merger
The merger agreement between Trump Media and Digital World contains some restrictions that prevent Trump from immediately converting these gains to cash. There’s a six-month period during which major shareholders can’t sell shares or use them for loan collateral.
That said, Trump owns more than 60% of his social media company, and it’s likely his supporters will fill most of the board — at which point they could vote to waive those restrictions. This isn’t a guarantee, though, as they would be hesitant to suffer the likely subsequent drop in share price.
Conversely, they could lift the restriction preventing shares from being used as collateral. This approach wouldn’t cause the same reduction and would allow Trump access to a bond. Should he find himself unable to pay the penalty, the attorney general’s office can seize Trump’s assets, then place a lien on them or sell them.
Moving Forward
While Trump’s net worth was already in the billions before the merger, a large part of that amount is tied to real estate holdings. Selling the lease on his hotel in Washington, D.C., and giving up his golf course in New York isn’t enough to afford the penalty, not to mention he’s also lost money and been subject to other penalties.
Trump was forced to pay $83 million in damages for defamation against E. Jean Carroll — a case in which a federal judge recently upheld the verdict and award and Trump’s motion for a new trial was denied. Fines and penalties are in the range of tens of millions of dollars, making $3 billion a major financial lifeline.
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This article originally appeared on GOBankingRates.com: How Trump’s Media Merger Could Provide Him With a Much-Needed $3 Billion Financial Lifeline
