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Trump's tech SPAC could make him billions with meme-stock frenzy

Sophie Alexander, Tom Maloney and Crystal Kim, Bloomberg News on

Published in Business News

So far, retail investors have little concern. Shares of Digital World Acquisition Corp., the shell company merging with Trump’s new venture to take it public, closed Friday at $94.20 — up from $9.96 before the deal was announced Wednesday. It’s also an increase of more than 800% from a $10 offering price that’s typically used in a SPAC merger agreement.

The press release said the new company would have an initial enterprise value of $875 million. Assuming that calculation used a $10 a share offering price and the $293 million Digital World has in trust, the SPAC’s owners will get about 42% of the combined company after accounting for shares the sponsor receives if a deal gets done.

That leaves 58% for Trump and any partners he has in Trump Media. That stake is worth nearly $4.8 billion, based on Digital World’s last price. The whole enterprise is being valued by the market at about $8.2 billion, compared with Twitter Inc.’s almost $50 billion equity valuation.

With the new media company’s valuation dwarfing the $875 million enterprise value agreed to by Trump, he may have been able to negotiate a sweeter deal. Terms of the agreement will need to be more fully disclosed and could still change before an agreement gets voted on by shareholders, an event that is probably months away.

Most of Trump’s current wealth is tied to the Trump Organization, a sprawling real estate business that has been hurt by the pandemic and legal troubles. There’s also at least $590 million in debt coming due in the next four years linked to the company’s properties, more than half of which is personally guaranteed by Trump.

 

In April, the company scored a win when its partner in two skycrapers, Vornado Realty Trust, refinanced debt tied to its San Francisco tower, bringing $617 million to its owners. The Trump Organization also appears to be closing in on a sale of Washington’s Trump International Hotel, which was a hotspot for political allies, lobbyists and conservative media figures during his administration.

“We are one of the most under-leveraged real estate companies in the country relative to our assets,” Trump’s son Eric Trump said at the time of the Vornado deal. On paper, he and his brother Donald Trump Jr. have been leading the Trump Organization. Chief Financial Officer Allen Weisselberg stepped down from his various roles after his indictment. The company was also charged with 15 felony counts in New York.

Trump hasn’t signaled that he’ll return to the Trump Organization. His focus now is on dominating the Republican party and his new media project, which would give him an avenue to connect with supporters and raise money after he was banned from Facebook and Twitter. That would be key if he chooses to seek a second term in 2024.

When Trump first ran for president, he claimed to have a fortune of $10 billion. Now the retail trading frenzy may bring him somewhat closer to getting there.

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