The headline Trump news on Friday was that investors in Truth Social, his money-losing social media platform, voted to take it public at a valuation that could net the former president about $3 billion. There's some press conjecture that the transaction will relieve Trump's current cash crunch, which includes the necessity of his posting a bond to cover a roughly $500-million court judgment by Monday to stave off the seizure of some of his properties by New York Atty. Gen. Letitia James.
C, called Digital World Acquisition Co. The merger was approved by investors in DWAC on Friday. That arrangement comes to fruition despite several questionable aspects of the transaction. Cs are supposed to come into existence without any prearranged acquisition deals, but rather to hunt them down within a set period, normally within two years of their formation. The Securities and Exchange Commission, however, charged in July that DWAC had 'formulated a plan to acquire and was pursuing the acquisition of TMTG' prior to its own IPO, and failed to disclose that to investors. SWAC settled the SEC case for $18 million.
Cs in general don't have the best reputation in the corridors of the SEC, because they could be used to execute initial public offerings without making the customary pre-IPO disclosures to investors. The Trump deal, which has been percolating for more than two years, looked from the first like a potential high-water mark for
C-related investment scams, as I wrote in 2021. The merged entity is expected to be priced at a valuation of about $5 billion. As 60% owner of the entity, Trump would stand to own about $3 billion in shares. It should be plain that the valuation has no rational relationship with Truth Social's financial picture, which is ugly in the extreme. In a prospectus issued last month, DWAC disclosed that Truth Social collected a mere $3.