Truth Social Plunges On Stock Market Same Day Merger’s Approved

Another interesting morning in Trump world. Truth Social completed its merger, which is alleged to net Donald Trump $3.3B, which God knows he desperately needs if anybody does. But, this is not an automatic save. For one thing, he can’t sell his shares for six months, minus a waiver — which he could get, but if he decapitalizes his new company on day one, then what was the purpose of building it in the first place?  Meanwhile, just the facts, Ma’am.

The merger will net Trump Media $300 million that Digital World initially raised from investors. Trump’s allies and company executives will also be granted bundles of shares in the new company that could be worth millions of dollars. But trading on the stock market will also open the company to more public scrutiny, and any drops in share prices would affect the value of those stakes.

Critics have said Trump Media is a “meme stock” with a more than $6 billion valuation they say is out of sync with its financial outlook. Trump Media lost $49 million in the first nine months of last year and brought in $3.4 million in revenue, Digital World said in an SEC filing.

Okay, so what’s a meme stock? A meme stock is a share in a company that has gained a cult like following on social media. Certainly Truth Social is that. Jonathan Last explains it.

So it’s October 2021. Trump has started his Truth Social network. In order to cash in on this scam paradigm-shifting platform, he needs to open it up to his cult retail investors, so that Cletus and Lurleen can transfer their wealth to him invest in the future of social media.

But Trump didn’t want to put Truth Social under an IPO microscope, for fairly obvious reasons.

How do you get to IPO $$$ without going through IPO-style disclosures?

SPAC it, baby!

In the fall of 2021, the product Truth Social was rolled out. This product was owned by a shell called Trump Media and Technology Group (TMTG). From the jump, TMTG was the target of a newly formed SPAC—the aforementioned Digital World Acquisition Group.

DWAC had sold shares totaling $290 million and had gotten itself listed on the NASDAQ. Both DWAC and TMTG seemed to have a very clear understanding of each other’s needs and desires. Call it destiny. Call it kismet. But absolutely do not call it prior collaboration, because that would be a violation of securities law.2

DWAC announced its plan to purchase Truth Social (via TMTG) and shares of DWAC went 🚀 🚀 🚀🌙🌙🌙.

Trump and TMTG then went and got themselves a round of PIPE investment, which doesn’t really matter except that it meant that Trump stood to make several multiples of $290 million once Truth Social was publicly traded as DWAC.

Okay. So the magical day of the merger has happened. It is March 22 and the vote was taken. And what happened? The stock value plunged:

• The price of shares in Digital World Acquisition Corp. fell more than 12% after the shell company’s shareholders approved a merger with the social media company owned by Donald Trump.
• DWAC opened the trading day at $44.20 per share.
• The newly merged company, Trump Media, could begin trading under the new ticker DJT next week.
• Trump holds a majority of shares in the new company, which would be worth $3 billion or more.

A total of 11% of the tradable shares of DWAC are being sold short, FactSet data shows.

This means investors holding these positions are betting the price will fall before they have to buy the shares back and return them to the entities who loaned the shares to them.

This is not a good sign, generally speaking. Truth Social doesn’t look to be on track to become the next AT&T, let’s just put it that way. Monday is another trading day.

A lockup provision in the merger agreement will also prevent Trump and other major investors from selling their shares for six months unless he is granted a waiver by the post-merger company’s board.

Any lockup change or waiver will be decided by the post-merger company’s board, which will be stocked with Trump allies, an SEC filing shows. The board’s nominees include Trump’s oldest son, Donald Trump Jr.; Trump’s former trade representative, Robert E. Lighthizer; Linda McMahon, who headed the Small Business Administration under Trump; and Kash Patel, who served on Trump’s National Security Council. […]

The post-merger company, which will be called Trump Media, could begin trading on the Nasdaq stock exchange as soon as Monday under the ticker symbol of Trump’s initials, DJT. That symbol was also used for Trump’s only other public company, Trump Hotels and Casino Resorts, which collapsed into a penny stock in less than a decade and filed for bankruptcy in 2004.

You’re aware of the tradition of never naming another ship after a ship that has sunk, because it’s considered bad luck. Hence, there was only one sailing ship Titanic. Maybe Donald Trump should take heed of that and not name his Truth Social stock after his failed Trump Hotels stock.

We shall see what we shall see. But an 11% plunge is not a good omen. But what may well happen, is Trump will get a waiver and pillage the coffers of Truth Social. Monday could be a very interesting day. Keep a sharp eye out for this story in particular. This could be a game changer, one way or the other. Trump may tank Truth Social faster than any other company of his by decapitalizing it or his investors may tank it in record speed by bailing and driving the stock into the ground. Either way, it’s going to be interesting to watch.