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Wednesday, March 22, 2023

Trump Social Media Venture Raises $1bn At Valuation Near $4bn

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Trump’s social media venture said it inked agreements to raise about $1 billion from a group of unidentified investors as it prepares to float in the U.S. stock market.

Digital World Acquisition Corp, the blank-check acquisition firm that will take Trump Media & Technology Group Corp public by listing it in New York, said it will provide up to $293 million to the partnership with Trump’s media venture, taking the total proceeds to about $1.25 billion.

The $1 billion will be raised through a private investment in public equity (PIPE) transaction from “a diverse group of institutional investors,” Trump Media and Digital World said in a statement.

Trump Media and Digital World said the per-share conversion price of the convertible preferred stock PIPE transaction represents a 20% discount to Digital World’s volume-weighted average closing price for the five trading days to Dec. 1, when Reuters broke news of the capital raise.

If that price averages below $56 in the 10 days after the merger with Digital World has been completed, the discount will grow to 40% with a floor of $10, the companies added. Digital World shares ended trading on Friday $44.97.

The rapid capital raise at a stratospheric valuation “underscored the former U.S. president’s ability to attract strong financial backing thanks to his personal and political brand.”

As reported previously, Trump is working to launch a social media app called TRUTH Social that is now several weeks away.

While Reuters is quick to note that “many Wall Street firms such as mutual funds and private equity firms snubbed the opportunity to invest in the PIPE” clearly many did invest and judging by the ravenous demand for Trump’s social engagement, their investment could pay off handsomely.

Among those investors who participated were hedge funds, family offices and high net-worth individuals.

“As our balance sheet expands, Trump Media & Technology Group will be in a stronger position to fight back against the tyranny of Big Tech,” Trump said in a statement on Saturday.

Investors attending the confidential investor road shows were shown a demo from the planned social media app, which looked like a Twitter feed, Reuters reported.

If Trump’s media venture is successful it may breathe new life into the SPAC bubble which had burst in mid-2021 after a surge of deals early in the year and in late 2020.

As Reuters notes, “special purpose acquisition companies such as Digital World had lost much of their luster with retail investors before the Trump media deal came along.

Many of these investors were left with big losses after the companies that merged with SPACs “failed to deliver on their ambitious financial projections.”

TRUTH Social is scheduled for a full rollout in the first quarter of 2022.

It is the first of three stages in the Trump Media plan, followed by a subscription video-on-demand service called TMTG+ that will feature entertainment, news and podcasts, according to the news release.

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