News
How Trump’s media merger could provide him with a much-needed $3 billion financial lifeline
BRENDAN MCDERMID / POOL / EPA-EFE / Shutterstock.com
As a result of former President Donald Trump’s civil fraud case in New York, which accuses him of substantially inflating his real estate appraisals and generally fortune for banks and insurance companies, the former president faces a fine of US$454 million.
See more information: How rich is former President Donald Trump?
To explore: Do you owe the IRS money? Most people don’t realize they should do this
Given his current campaign for a second term, the recent merger of his company, Trump Media & Technology Group, with Digital World Acquisition Corp.
It is estimated that his net worth will increase by $3 billion due to this partnership. According to Reuters, Trump is already losing to Biden in terms of campaign donations. Between large and small contributions, Biden has raised $128.7 million as of March 28, 2024, while Trump has raised just $96.1 million.
SPAC Considerations
This specific case was not without complications. Digital World has been defined as a special purpose acquisition company (SPAC). SPACs do not have commercial operations and are created with the intention of acquiring or merging with another company.
The Securities and Exchange Commission (SEC), which prohibits SPAC merger talks before their initial public offering (IPO), investigated the proposed activity between Digital World and Trump Media. Ultimately, the former settled with the SEC for an $18 million fine.
The closing of the deal had shareholders and Trump supporters celebrating online, in contrast to Trump Media’s past performance. Last year, Truth Social, the online platform owned by Trump Media, earned $3.3 million in advertising revenue against a net loss of $49 million.
The SPAC merger follows a similar trend to other online platforms like Rumble and PublicSquare – both of which cater to the same demographic as Truth Social.
Find out more: 25 richest politicians in the USA
The merger
The merger agreement between Trump Media and Digital World contains some restrictions that prevent Trump from immediately converting these earnings into cash. There is a six-month period during which major shareholders cannot sell shares or use them as collateral for loans.
That said, Trump owns more than 60% of his social media company and his supporters are likely to occupy the majority of the board – at which point they could vote to lift those restrictions. However, this is not a guarantee as they would hesitate to suffer the likely subsequent drop in share price.
On the other hand, they could lift the restriction that prevents the use of shares as collateral. This approach would not cause the same reduction and would allow Trump access to a bond. If he is unable to pay the fine, the attorney general’s office could seize Trump’s assets and then place them in pawn or sell them.
The story continues
Moving on
Although Trump’s net worth was already in the billions before the merger, a large portion of that amount is tied up in real estate holdings. Selling the lease on his Washington, D.C. hotel and giving up his New York golf course isn’t enough to cover the fine, not to mention he also lost money and was subject to other penalties.
Trump was forced to pay $83 million in damages for defamation against E. Jean Carroll – a case in which a federal judge recently upheld the verdict and sentence and Trump’s motion for a new trial was denied. Fines and penalties are in the tens of millions of dollars, making $3 billion an important financial lifeline.
More from GOBankingRates
This article originally appeared on GOBankingRates. with: How Trump’s media merger could provide him with a much-needed $3 billion financial lifeline