Donald Trump appeared this Monday at Trump Tower on Fifth Avenue in New York after going to court where he will sit in the dock from April 15 to be tried for various crimes. At the same time, another court has reduced the bail that he has to provide for the civil fraud case for which he was also convicted in New York from 464 to 175 million dollars. Despite accusations and convictions and despite his multiple real estate possessions, the former president said this Monday that the most valuable thing he has is the Trump brand. That brand, in the form of the initials DJT, will be the one under which his company, owner of the Truth Social network, will be listed starting this Tuesday. The company's shares have soared 35% this Monday, the eve of the change.
The market continues to defy logic with the valuation of the former president's social network. The current transition situation is complex. Spac Digital World Acquisition Corp (DWAC) has already merged with Trump Media & Technology Group (TMTG), the owner of Truth Social. The merger is effective and closed and the company no longer operates only under the name TMTG, as the company has communicated to the United States Securities and Exchange Commission (the SEC). In some ways, this Monday was the first day of Trump's company on the stock market.
The merger, however, has been executed with a share exchange and the new securities, although issued, have not yet been admitted to trading, which they will do this Tuesday. So, from another point of view, this will be the genuine stock market debut, including the change of stock code to DJT. The truth is that the price already marks, at least in theory, the value of the merged company as a whole. However, the current valuation hardly seems sustainable, unless the Trump brand is worth even more than Trump himself believes.
DWAC was a Spac, a company created to carry out a purchase or merger operation. That kind of empty shell with a bearer check has contributed about 300 million dollars in cash to the merger and the path to going public. TMTG, apart from debts and lawsuits, provides the name and a social network with little success, little income and abundant losses.
With this Monday's revaluation alone, Trump has earned (on paper) $1,024 million. When the merger is executed, Trump owns 78.75 million shares (just over 58% of the capital). The shares closed this Monday at $49.95, so its participation would be valued at $3,934 million at the current market price. DWAC's share price is up 266% in the last 12 months and 186% so far this year.
Trump, however, has made a commitment not to dispose of his shares in the next six months. If by then the market has not adjusted the valuation, it will also be difficult to place the securities among investors without causing a collapse.
The price that the market gives the company defies logic and it is very difficult for the former president to materialize those profits, but for now the price resists the warnings in this regard. DWAC has become a meme stock, moving on impulse rather than the company's economic fundamentals. Trump's presence, however, seems to attract enough buyers to boost the price, especially when the stock is not very liquid.
The transaction prospectus revealed last month that Trump's social network company has minimal revenue and large losses. TMTG's turnover between January and September 2023 was only $3.4 million, while its losses were $49 million. For its part, DWAC contributes about $300 million in cash, but since it is a Spac, it also has no income as a business.
The code DJT was once used by Trump Hotels and Casino Resorts, which went public in 1995. In 2004 it declared bankruptcy and was delisted from the market. The Trump brand came out badly, but is now trading higher.
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