Financial trouble.... Financial trouble......

Why Trump’s big Wall Street payday won’t bail him out of financial trouble

The approval from investors would come as Trump faces a severe financial crunch: He’s been hit with more than $500 million in civil penalties, not to mention ongoing legal fees as he appeals verdicts against him.

By DECLAN HARTY and VICTORIA GUIDA

Donald Trump is on the verge of gaining what could be a massive windfall from his social media company. But it will likely come too late to save him from the financial peril he’s facing now.

Investors on Friday are expected to sign off on a deal to allow Trump’s new venture, which operates Truth Social, to be publicly traded on Wall Street, clearing the way for a possible multibillion-dollar payday for the former president.

But Trump’s stake will be tied up for much of the year under a so-called lock-up agreement, a normal arrangement for such deals to ensure that insiders don’t bail as soon as a company goes public and push down the stock price.

Trump could try to obtain a waiver from that rule, but even then he wouldn’t be able to sell more than a small fraction of his stake at any given time — up to 1 percent of the outstanding shares every quarter. And if he eventually does unload a large quantity of stock, the ramifications could be significant, according to investors and others watching the deal. That’s because Trump himself is the heart of the venture, they say, and any sign that his interest is waning could chill investors.

“It’s simply trading on Trump’s name,” said Kristi Marvin, founder of SPACInsider, a research firm. “People aren’t buying this because they like the fundamentals — they’re buying this because they like Trump.”

The pending approval from investors comes as Trump faces a severe financial crunch: He’s been hit with more than $500 million in civil penalties, not to mention ongoing legal fees as he appeals verdicts against him.

The deal will take Trump Media & Technology Group public through a purchase by Digital World Acquisition Corp., a so-called special purpose acquisition company, or SPAC, whose sole aim is to buy a private firm with actual operations and take it public. The imminent merger comes after two years of contentious negotiations, marked by lawsuits and an SEC investigation.

If approved by the investors, the combination would result in the GOP presumptive presidential nominee’s company trading in the public markets in the coming weeks and receiving an infusion of cash. Trump will own at least 58 percent of the new company — a stake that’s currently valued at roughly $3 billion — surpassing what Forbes estimates is his current net worth.

Trump himself is expected to become chair of the board of the combined entity, according to securities filings.

Trump Media & Technology Group’s “success depends in part on the popularity of its brand and the reputation and popularity of its Chairman, President Donald J. Trump,” Digital World said in a February filing, though the firm noted he could divest his interest given that he is a candidate for president.

Spokespeople for TMTG did not respond to a request for comment.

Trump is confronting a mountain of legal bills in the throes of a costly election campaign.

A judge in New York last month found that for roughly a decade the former president orchestrated massive business fraud by falsely inflating his net worth. The GOP nominee told an appellate court this week that he can’t obtain a bond for the full amount of the penalty — more than $450 million, including interest — raising the possibility that the state attorney general’s office could begin to seize his assets.

He also recently posted a separate $91.6 million bond to prevent the writer E. Jean Carroll from enforcing a defamation verdict, which he is appealing.

But Trump won’t be able to cash out anytime soon after the merger. Instead, he’ll likely need to sit on the stock for six months. And his shares, in the meantime, will ride on the whims of “MAGA meme stock investors,” small investors who are currently holding many of the shares, said Brian Quinn, a law professor at Boston College.

“By the time Trump is able to start selling his shares, I doubt they will be worth much,” Quinn said. “Certainly less than his present requirements.”

Pitched in the waning months of a marketwide craze that hit during the pandemic, Trump Media and Digital World’s planned union was framed as a way to finance what would be Trump’s next act in business: taking on Silicon Valley’s social media giants.

The deal’s unveiling came just months after Trump was booted off Twitter, now known as X, over the Jan. 6 insurrection, and Trump Media made clear that it planned to go after Meta, Netflix and even Amazon.

Yet Trump Media’s business today solely revolves around Truth Social. The conservative social media platform has failed to attract the same user base as X. Trump’s own follower count on X is still 13 times larger than on Truth Social, despite the fact he exclusively posts on Truth. Trump Media, meanwhile, is bleeding money. The company generated a more than $26 million loss in the quarter ended Sept. 30, 2023.

But the deal could breathe new life into the company’s finances. Trump Media will gain upward of $300 million by combining with Digital World.

Investors’ approval of the deal was far from guaranteed not long ago. Since the start, the deal has been steeped in congressional intrigue, volatile investor interest and regulatory issues. Last year, Digital World agreed to pay $18 million to settle charges from the SEC.

As Trump’s path to the November election cleared over the course of 2024, though, Digital World shares ripped higher. Then, last month, the SEC signed off on the deal’s paperwork.

For Trump, the Wall Street regulator’s nod was serendipitous. Just two days later, a judge in New York handed down a more than $350 million civil penalty against the former president.