Facing $450 million in various legal charges, former President Donald Trump is banking on a meme stock to pay off the debt.
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No, Trump isn’t purchasing shares of AMC or GameStop, the famous meme stocks that garnered headlines in early 2021, in the hopes they will rise “to the moon,” to borrow a phrase that commonly appears on the Reddit subthread r/WallStreetBets.
He’s betting this his name will have enough clout to drive up shares of his social media platform, Truth Social, once he takes the company public.
But Trump isn’t issuing an IPO — and that’s where his tactic gets interesting.
Taking a Company Public via a SPAC
Truth Social’s financials are lackluster, based on U.S. Securities and Exchange Commission filings. The company brought in $3.4 million from advertising in the first three quarters of 2023. Truth Social had only 800,000 active mobile users in February 2024. That may sound like a big number, but consider that Reddit had 46 million users that same month, according to the website GWSolutions.com.
Truth Social is set to merge with Digital World Acquisition Corporation, giving the combined companies a valuation of roughly $9 billion, according to The Washington Post. DWAC is a special purpose acquisition company (SPAC).
What Is a SPAC?
A SPAC has no business of its own. A SPAC is a blank-check company designed to purchase other companies and take them public. It’s not necessarily an easier path to the stock market than an IPO, but it can help smaller companies with a low valuation gain fast funding through the sale of stocks.
Michael Klausner, a Stanford Law School professor, told VanityFair.com that the share price of many SPACs is “out of line with their true value.” In essence, the value of SPACs are driven by meme stocks, news buzz, and retail investors who believe in the company and its vision or just want to be part of the next big thing.
Digital World Acquisition Company gives Trump supporters an opportunity to invest in his brand. “It’s about buying the Trump name,” Jordan Libowitz of the government watchdog Citizens for Responsibility and Ethics in Washington told Vanity Fair.
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Exactly how much his name is worth, however, and if it’s enough to get Trump out of debt, remains to be seen.
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