“We never expected it to get this far,” said Accelerate Financial Technologies CEO Julian Klimochko. The firm runs a fund focused on so-called platinum check companies, such as Digital World, which buys private companies and aims to take them public. “Trades die on the vine, but this one has managed to survive despite seemingly everything going against it.”
The SEC’s green light is a surprising turnaround for a deal that has been floundering and offers new hope for President Trump’s next move in business as the campaign against presumptive Republican nominee Joe Biden heats up. .
Digital World Acquisition Corporation (DWAC) stock soared more than 25% on Thursday’s news.
From the beginning, the planned merger has been plagued by regulatory issues, market volatility and looming deadlines that pose existential threats to the arrangement.
The SEC began investigating the trade shortly after it came to light in late 2021, resulting in the indictment of three Florida men involved in the trade on insider trading charges and the company’s disclosure of information. We have decided to reach a separate settlement with the Digital World over this issue. Last year, Digital World agreed to pay $18 million to resolve the allegations.
Digital World and Trump Media executives had to repeatedly ask investors for more time to finalize the deal.
Digital World CEO Eric Swider said in a statement announcing the SEC’s approval of the transaction’s so-called registration statement, “We are very proud of the progress we have made toward moving forward with our business combination.” “I think so,” he said. “This achievement is an important milestone for us.”
The companies plan to hold a final shareholder vote on the deal in the coming days, the statement said. But Klimochko and other parties involved in the deal say the vote is likely a formality for now and that the combined company’s shares could start trading as early as next month.
Trump Media, led by former California congressman Devin Nunes, outlined a lofty business plan at its launch. However, the company’s main business currently revolves around Truth Social, a Twitter-like site that promotes “open, free, and honest global conversation without discrimination based on political ideology.” There is.
Trump Media brought in $1.1 million in revenue in the three months ended Sept. 30, 2023, compared with just over $203,000 in the same period last year, according to regulatory filings. Still, the company posted a net loss of more than $26 million in the quarter.
The integration with Digital World could give Trump Media millions of dollars in new cash, and potentially even more from some institutional investors.
If the deal goes through, Trump will be the combined company’s largest investor with more than 78 million shares. This could mean he would own up to 69% of the outstanding shares, but would not be able to sell them for several months after the deal closes.
Separate filings say the combined company will include the former president’s son Donald Trump Jr., former U.S. Trade Representative Robert Lighthizer and former Small Business Administration head Linda McMahon. A new board of directors will also be established, with the participation of
Still, Trump Media is not without risks. Entering the public markets will subject the company to new scrutiny from regulators, investors and the general public. And the company’s success depends in part on President Trump himself, a potentially difficult scenario given the former president’s legal troubles.
Shortly after news of the SEC’s approval, a New York judge issued a proclamation that Trump’s first criminal trial would begin on March 25th.
In its own filing, Trump Media also pointed to external research that found a lack of interest among voters, including Republicans, in using social platforms associated with Trump.
“For TMTG to be successful, we need millions of people to register and use our platform on a regular basis,” the company wrote. “If President Trump’s popularity declines or new controversies arise that undermine President Trump’s credibility or people’s desire to use platforms associated with President Trump, or if President Trump derives financial benefit from them, TMTG’s results of operations may be adversely affected.”
But for many investors, their interest in Trump Media lies more in President Trump than in the company itself.
“There’s been a lot of hype, excitement and trading around Mr. Trump’s name and person,” said Usha Rodriguez, a law professor at the University of Georgia. “The whole DWAC story showed us that there was a portion of the market that would buy because he said he would.”