June 14, 2024

Donald Trump’s social media venture; investors pledge $1 billion

3 min read

Donald Trump’s social media venture (Trump Media & Technology Group); investors pledge $1 billion

Former US President Donald Trump’s social media firm announced on Saturday that it had reached agreements to raise roughly $1 billion from an unnamed group of investors as it prepared to list on the New York Stock Exchange.

Trump’s ability to generate substantial financial backing thanks to his personal and political brand was highlighted by the capital raise, which was first reported by Reuters on Wednesday.

Trump’s new company, Trump Media & Technology Group, was founded in October. He announced plans for a new messaging program called “Truth Social” to compete with Twitter and other social media services that banned him after the Jan. 6 Capitol insurgency.

He’s working on a social networking app that will be released in a few weeks.

Digital World Acquisition Corp, the blank-check acquisition corporation that would take Trump Media & Technology Group Corp public by listing it in New York, announced that it will contribute up to $293 million to Trump’s media venture, bringing the total proceeds to around $1.25 billion.

Trump Media and Digital World announced in a statement that the $1 billion will be raised through a private investment in public equity (PIPE) transaction from “a diverse group of institutional investors.” Requests for the names of the investors were ignored.

In October, Trump Media agreed to go public with the Digital World at a valuation of $875 million, including debt. Based on the price of Digital World shares at the end of trade on Friday, the social media company is now worth about $4 billion. The stock was scooped up by Trump loyalists and day traders.

Many Wall Street institutions, such as mutual funds and private equity firms, passed on the PIPE chance. Hedge funds, family offices, and high-net-worth individuals were among the investors that took part, according to Reuters. The money of the exceedingly wealthy and their relatives is managed by family offices.

Some Wall Street investors are wary of Trump’s presidency. After his supporters attacked the US Capitol on Jan. 6, he was banned from major social media sites for fear of inciting future violence. The attack on the Capitol was based on unfounded allegations of extensive election fraud in the previous year’s presidential election.

The transaction is also subject to regulatory scrutiny. Last month, U.S. Senator Elizabeth Warren requested that the Securities and Exchange Commission (SEC) Chairperson Gary Gensler investigate the planned merger for alleged securities law violations related to disclosure. The SEC has refused to say if it intends to take any action.

The per-share conversion price of the convertible preferred stock PIPE deal, according to Trump Media and Digital World, is a 20% discount to Digital World’s volume-weighted average closing price for the five trading days leading up to Dec. 1, when Reuters broke the news of the capital increase.

According to a presentation on his company’s website, Trump had 89 million Twitter followers, 33 million Facebook followers, and 24.5 million Instagram followers at the time he was blocked.

According to Reuters, investors who attended the private investor roadshows were shown a preview of the intended social networking app, which resembled a Twitter feed.

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