Former US president Donald Trump may have sighed a relief after a merger deal of Trump Media & Technology Group and Digital World Acquisition Corp (DWAC) amid the businessman’s financial troubles but it may not give him cash relief.
Despite Trump getting a dominant shareholding in the company and a windfall of $3.5 billion, experts believe that the Republican presidential candidate would not easily be able to “translate that stake into cash”.
The four-time-indicted has been struggling to submit a bond of over $450 million in his fraud case in New York.
A CNN report quoting Matthew Kennedy, senior initial public offering market strategist at Renaissance Capital, as saying: “President Trump won’t be able to monetise that stake right away.”
After the approval, the trading may start under the new name and ticker DJT — initials of Trump — by Tuesday or Wednesday.
Charles Whitehead, a law professor at Cornell Law School, was also quoted as saying: “Trump’s shares in this company are in many ways even less liquid than his real estate holdings.”
It is because experts believe that the market is overvaluing Trump Media.
“The stock price is clearly a bubble,” Yale law professor Jonathan Macey told CNN, adding that “no rational investor would take the stock at face value, especially if they had to hold it for any length of time.”
According to the filings, the revenue of Trump Media was just $1.1 million during the third quarter and a loss was $26 million in the same quarter.
“Despite the situation, the value of Trump’s company is being set at $6 billion on a fully diluted basis,” Jay Ritter said who is a finance professor at the University of Florida.
It is hard to justify he said adding that “it is grossly overvalued.”
In any case, if the former president finds a buyer he would not be likely to sell stock. There is also a lockup agreement in which a stakeholder is prohibited from offloading stakes after the merger for a certain time.
“No one wants to buy into a company where the largest shareholder – and really the face of the biggest product — is selling,” said Whitehead.
The key Trump Media stakeholders agreed not to sell their common stock for six months to maintain “important stability”, according to filings quoted by CNN.
