Donald Trump values his nascent media company at less than $30 million, a stark discount to the more than $1 billion valuation implied by investors who piled into the blank check that’s hoping to bring the firm public.
(Bloomberg) — Donald Trump values his nascent media company at less than $30 million, a stark discount to the more than $1 billion valuation implied by investors who piled into the blank check that’s hoping to bring the firm public.
The former president said Trump Media & Technology Group Corp., which is going public through a SPAC merger with Digital World Acquisition Corp., is worth $5 million to $25 million, according to a financial disclosure filed late Friday with the Federal Election Commission.
That leaves a wide gap with what SPAC traders are currently paying for Digital World even after a roller-coaster ride for the share price since the tie-up was announced in October 2021. It also may suggest the potential downside risk still facing retail investors should the deal fall through as the companies themselves have warned in filings that investigations by regulators could derail the planned merger.
“This massive discrepancy is because one is a very conservative estimate made for the Federal Election Commission and one is a multiple of sales” that compares it to companies like Twitter, says Michael Broudo, an event-driven equities analyst at Oppenheimer. “There’s a very loyal retail contingent that’s either indifferent to the downside if the deal collapses, or is willing to take the risk.”
A representative for Digital World didn’t respond to e-mail requests for comment, while Truth Social said it’s “poised to unlock billions of dollars in value” once the Securities and Exchange Commission “stops obstructing our merger.”
The SEC has sought records tied to meetings involving the blank-check company’s board of directors, its policies and procedures related to trading and the identities of certain investors. Meanwhile, a federal grand jury in the Southern District of New York has issued subpoenas to board members, a private equity firm and Digital World itself.
Terms of the merger show Trump Media, and therefore Trump’s stake in the company, could be worth closer to $1.7 billion depending on the performance of the stock after the combination is completed, according to a October 2021 filing. Trump has said that he plans to use the cash raised from the merger to help Trump Media “fight back against the tyranny of Big Tech.”
While Trump’s latest document showed a starkly different valuation than what the companies laid out in late 2021, many of the firms Trump Media compared itself to have spiraled since the SPAC deal was announced. Meta Platforms Inc. has sunk more than 35%, Netflix Inc. has plunged 47% and Walt Disney Co. has lost 42% in that time.
Trading in Digital World itself has been volatile as investors weigh the criminal case against Trump, the removal of its chief executive and chairman, and warnings of big losses in addition to probes by regulators. The SPAC has slumped 72% over the past year, while warrants tied to the blank check, which would be worthless if the deal fails to be completed, have dropped 77% — wiping out millions for investors.
Still, Digital World trades at a 28% premium to the cash it holds, making it the best performing special-purpose acquisition company on the market. That means the $13.31 share price implies a valuation greater than $1 billion for Trump Media, using the $875 million enterprise value the pair assigned when the deal was struck in 2021, according to calculations done by Bloomberg News.
Digital World has until Sept. 8 to complete the merger after struggling to get retail investors to vote for an extension, forcing it to postpone the meeting more than five times. If the deal isn’t completed by the deadline, the SPAC would be forced to shutter and return the roughly $10.41 a share to stockholders, resulting in big losses for investors who paid a premium for a shot at the SPAC and wiping out warrant holders.
Shares have slumped due to “the higher than usual probability that the deal will fail because of some challenges specifically related to DWAC,” said Usha Rodrigues, a professor of corporate law at the University of Georgia School of Law, referencing the investigations. That said, “there’s a major discrepancy between the market valuation” and what Trump’s disclosures show.
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