Donald Trump, the former president, recently expressed his love for Truth Social on social media, generating excitement among his followers. However, this declaration came at a time when shareholders in Digital World Acquisition Corp. (DWAC) were experiencing a sharp drop in share price. Following the shareholder approval of the merger with Trump Media, DWAC’s share price plummeted nearly 14%. This downturn could potentially impact Trump’s majority stake in the newly merged company, Trump Media, which was previously estimated to be around $3 billion.
The decline in DWAC’s stock price raised concerns about the ability of Trump Media & Technology Group (TMTG) to generate significant revenue. Reports revealed that TMTG incurred losses of nearly $50 million in the first three financial quarters of 2023, with minimal revenue amounting to less than $3.5 million during that period. These financial challenges, coupled with Trump’s mounting legal issues and associated costs, have sparked doubts about the company’s future financial performance.
Looming Legal Battles and Cash Flow Problems
Amidst Trump’s endeavors to regain political power and unseat President Joe Biden, he faces substantial civil judgments exceeding a half-billion dollars in various courts. Additionally, Trump’s legal team recently acknowledged his lack of liquidity to post a $454 million fraud judgment bond, hindering the New York Attorney General’s Office from enforcing the award. These legal hurdles, along with the potential need to cover legal expenses, could prompt Trump to seek an early sell-off of his company shares, thereby impacting the share price and investor sentiment.
Potential Impact on Shareholders and Future Trading
Trump’s significant ownership stake in Trump Media, coupled with the possibility of early share sales to address legal challenges, poses a risk to other shareholders. Although a six-month restriction on share sales is in place for Trump, the company’s board of directors, including his son Donald Trump Jr., could decide to lift this restriction. Such a move could trigger a decline in Trump Media’s share price, leading to a domino effect as other shareholders may opt to sell their stock, further depressing share prices.
Trump Media is slated to trade on the NASDAQ stock market under the ticker symbol DJT, marking a significant milestone for the company. Notably, the same ticker symbol was previously used for Trump’s defunct publicly traded entity, Trump Hotels & Casino Resorts. This earlier business faced financial challenges, operating losses, and eventually filed for bankruptcy protection in 2004. The historical parallels between the two companies raise questions about Trump Media’s future financial stability and market performance.
Overall, the recent share price plunge of Digital World Acquisition Corp. and the uncertainties surrounding Trump Media’s revenue-generating capabilities, legal entanglements, and potential share sales highlight the complex challenges facing the company in the coming months. Investors and industry analysts will closely monitor the developments surrounding Trump Media’s public debut and subsequent market performance to assess its long-term viability and profitability.
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