Trump Is About to Get $3 Billion Richer Thanks to Truth Social

On Friday morning, a majority of the voting shareholders in a holding company called Digital World Acquisition Corp. determined that Donald Trump was about to become a hell of a lot richer on paper. Through a SPAC merger, Trump’s social-media app, Truth Social, is now going public, netting him roughly $3 billion, according to today’s highly fluctuating stock price. It’s a number that’s hard to grapple with — more than doubling Trump’s most recent net worth as estimated by Forbes.

The windfall is extremely good timing for the former president. After years of delaying the vote to make Truth Social go public through the questionable process of a special-purpose acquisition company, Trump’s personal valuation will soar just as he needs to come up with a bunch of money. Because he has failed to persuade any lenders to post a $454 million bond for his penalty for business fraud, New York attorney general Letitia James can begin seizing Trump’s assets as of Monday. With a few extra billion to his name, Trump now has more options to come up with the cash. But the Truth Social money will not be an immediate cure-all for Trump’s legal woes.

As stated in SEC filings, Trump now has around 78 million post-merger shares in Truth Social; at around $38 a share, they are worth $2.96 billion. But he cannot just begin selling off his holdings to post the full sum in New York as he appeals his civil judgment. The Truth Social deal includes something called a lock-up agreement, which blocks members of a newly public company from selling shares for a period of time to avoid a selloff and price collapse. In Truth Social’s case, Trump won’t be able to offload his shares until September of this year.

Even if he decides to sell off his shares in September, it’s unlikely that he will ever see a number close to the $3 billion it’s worth today. “I think it’s a very overly optimistic assumption to think that the number of shares times today’s share price equals the wealth gain he is going to get from this,” said NYU professor and SPAC skeptic Michael Ohlrogge.

There are many barriers to turning this number on paper into a reality. So far, the company has essentially functioned as a meme stock, gaining popularity not for the value of the business involved but because there is something more valuable there — hype. Now that it is going public, will the stock hold its value? Will people really want to buy 78 million shares of Truth Social, a company with terrible ad sales, negative cash flow, and loads of lawsuits from spurned former employees? “Just because he found ready willing buyers for the Trump Sneakers doesn’t mean he can easily find buyers for tens of millions of shares of his newly public company,” said Ohlrogge.

There are also some market factors that could cut into Trump’s cut. “Before a SPAC merger is completed it tends to be quite difficult to short sell the stock,” said Ohlrogge. “So people who have a negative opinion on it have a hard time expressing that in the market. In a sense, the only people who can make bets are optimistic — which elevates the value of SPAC shares in general. Once the merger completes, I suspect it will become easier to borrow shares for short fails, which has the potential at least to exert more downward price pressure.”

And then there’s the fact that SPACs tend to fail after going public, which might have started happening after the announcement on Friday morning:

$DWAC shares falling fast on the vote passage. Folks trying to get out. pic.twitter.com/nbDvUktCbq

— Dan Primack (@danprimack) March 22, 2024

But Ohlrogge notes that even if Trump got a fraction of the money that his shares are technically worth, it would nonetheless be a good deal — considering that the only work he has done is to post mean things about political adversaries. “It’s still a lot of money that Trump would get,” he said. “It’s still a lot of value, even if the shares dropped 90 percent, it’s still hard to justify the valuation of the company at one-tenth of its value.” But if things go his way, however, Trump could make even more money off this deal. “There is an earn-out provision that gives him an additional 40 million shares provided the price remains about $17.50 for 20 out of 30 consecutive days post-merger,” said Ohlrogge. If the stock price remains above that point, he estimates that Trump would get about 115 million shares worth
Based on a share price of $42 and Trump’s presumed 90% ownership of TMTG, I estimate Trump will get about 115 million shares worth around $4.8 billion at the current stock price.

Maybe Trump will be $3 or $4 billion richer, maybe not. But the Truth Social windfall could have a short-term benefit for him as well. The lock-up clause that stops Trump from selling immediately also has a provision that stops him from using the value of his shares as collateral. Ohlrogge says that it would not be difficult for Truth Social to slash that clause, allowing Trump to use the funds to pursue the massive bond needed in New York. “If they let him out of it completely and then he sold a whole ton of his stock and then the stock price dropped dramatically, it would open up him and any of the directors and officers who approved that to liability,” said Ohlrigge. “Letting him out of the don’t-borrow condition would be a favored move for the company because it would be a lot harder for shareholders to bring a lawsuit claiming that they’ve been harmed by the fact that he was using these shares as collateral for a loan if he was subject to this lock-up.”

If Trump were to lose the election, most analysts agree, Truth Social would be worthless. But for now, this is an unmitigated win for the ex-president in a season of financial losses and lawsuits. In January 2021, it would have been hard for many Americans to grapple with the reality that Trump would be leading in the polls for the next presidential election. Even harder to imagine is that the decision for Twitter to remove him from their platform for inciting violence would lead to a $3 billion surge in Trump’s net worth. He rode a meme stock based on a subpar company and pulled off one of the largest SPACs ever. Now it’s time to see if he can cash out.

This post has been updated.