Sunday, November 28, 2021

Trump could get big ‘bonus’ promotions on new social network

NEW YORK (AP) – Donald Trump’s social network will receive tens of millions of special bonus shares in a new publicly traded venture if it performs well, handing over possibly billions of dollars of paper wealth to the former president based on current stock prices, based on current prices for shares. The prospectus was filed with regulators on Tuesday.

The filing says Trump’s social media company, which aims to challenge Twitter and Facebook, will be able to use warrants convertible into 40 million shares of the new publicly traded company over three years. The exact number will depend on how high the company’s shares are trading during that time, with the maximum amount only granted if the share price is at least $ 30 or higher over an extended period.

The bonus shares for his company will be added to nearly 90 million shares, which are arguably worth billions more.

“Trump and his fellow shareholders could walk away with really big payoffs,” said Jay Ritter, a professor at the University of Florida who specializes in initial public offerings, although he warned that the stock could fall. “At some point, the company will need to make a profit, and given the competitive nature of the media industry, this might be an exaggeration.”

Trump launched his new company Trump Media & Technology Group, last week when it unveiled plans to create a new messaging app called Truth Social to compete with Twitter and other social networks that banned it following the January 6 US Capitol uprising.

TMTG’s plan is to become a public company through a merger with the public company Digital World Acquisition Corp., a specialized acquisition company, or SPAC, whose sole purpose is to acquire a private company and make it public.

Digital World shares fell 30% on Tuesday to close at $ 59.07. It was trading above $ 100 last week when Trump’s social media company announced a merger with him.

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However, the closing price implies that Trump’s bonus “earning” shares, if provided in full, would be worth $ 2.4 billion, though this estimate is far from accurate. Ritter warned that if Trump’s bonus shares are issued, they will reduce the number of existing shareholders, which will affect the share price.

The bonus shares will be added to the roughly 87 million shares TMTG will also receive, according to Ritter’s calculations from last week’s merger announcement. At current prices, this share will cost an additional $ 5.1 billion.

The big drop in Digital World shares on Tuesday is a reminder to investors of the risks of investing in SPAC, a company whose stocks have soared and dropped repeatedly.

Even with the prospectus, investors are still in the dark about Trump’s new company. It provides few details on who will run day-to-day operations and does not provide financial data.

IPO expert Ritter said the valuation of Trump’s company is remarkable given that the company has so little disclosure and virtually no assets.

“But it’s clear that he has a big brand that could potentially be worth billions of dollars,” he said.

Whatever Trump’s stake in the new company may be, he will not be able to sell his shares right away. The “blocking” clause set out in the prospectus states that he will not be allowed to sell until at least five months after the merger.

Trump is listed as chairman of TMTG.

The prospectus recognizes the “controversial nature” of businesses involving Trump and his family.

And it says steps are being taken in case Trump runs for president again. It says the new company is structuring Trump’s “ownership and position” so that destructive change is not necessary if Trump decides to run for public office or is convicted of a felony.

Nation World News Desk
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