Truth Social's Rise: The Impact Of SPAC Mergers On Donald Trump's Wealth

On March 26, not quite a month ago, the technology firm that owns Donald Trump's social media company, Truth Social, went public via SPAC merger. Truth Social's journey to becoming a public company was notably swift, bypassing the traditional and often costly IPO process. Instead, it teamed up with an existing public shell company named DWAC, enabling it to list on the NASDAQ under the ticker symbol "DJT." This transition into the public arena marked a significant moment for the company and its founder, Donald Trump.

DJT's debut on the market was remarkable, with shares initially priced at $58 and climbing to $66 the following day, leading to a market capitalization of $9 billion. Such a valuation is astonishing, particularly when considering that Truth Social generated a mere $4.1 million in revenue in 2023. To put this into perspective, Snapchat reported revenues of $4.6 billion, yet its market cap is around $18 billion. This stark contrast illustrates the disparity between the company's valuation and its earnings.

Despite DJT's stock price halving since its IPO, it remains sufficiently high for Donald Trump to potentially unlock a $1.3 billion "Earnout Bonus" when the market closes on Tuesday afternoon. Heading into that day, Trump held approximately 79 million shares of DJT, which accounted for roughly 60% of all outstanding shares. At the peak valuation of $9 billion, his holdings were valued at around $5.4 billion, propelling his net worth to an all-time high of $7 billion, a milestone that briefly placed him among the world's 500 richest individuals.

However, DJT's stock has seen fluctuations, dipping from its high of $66 on March 27 to $23 by April 16, before closing at $35.50, which translated into a market cap of $4.85 billion. At this price, Trump's shares are worth about $2.8 billion, bringing his overall net worth down to $4.4 billion. This figure is still impressive, yet it is insufficient for him to retain a position among the top 500 wealthiest people globally.

Exciting developments are on the horizon for Trump! As per the terms agreed before the SPAC merger, if DJT's stock price stays above $17.50 for any 20 days within a 30-day timeframe, he will be awarded an additional 36 million shares as an "earnout bonus." As of Monday, closing at $35.50 marked the 19th day of this threshold.

Should DJT secure a closing price above $17.50 on Tuesday, which seems highly likely, Trump will unlock his 36 million share bonus. If DJT maintains its closing price around $35.50, these new shares will be valued at an impressive $1.3 billion. Assuming all goes as planned, Trump's total shareholding will reach 115 million, valued at $4.1 billion at the current price, raising his net worth to $6 billion. This increase should enable him to reclaim a position among the world's wealthiest individuals.

However, there are important considerations to keep in mind. DJT must issue 36 million new shares to fulfill this earnout bonus, as indicated in an SEC filing last week. This announcement contributed to a drop in share price to $22 on April 16. It raises the question: is the news of this bonus already reflected in the stock price, or will further declines occur once the shares are issued? Moreover, unless Trump receives special permission from the company, these new shares will be subject to a six-month lockup period, just like his current shares. This means he cannot liquidate them for cash until late September or October.