Donald Trump’s new media venture sees its course soar
Shares of Donald Trump’s conservative new media company soared this week, mostly fueled by Reddit-online daytraders, but some well-known hedge funds have also proven to be early stage investors.
Trump Media & Technology Group merged with a shell company called Digital World Acquisition Corp. (NASDAQ: DWAC) to go public. Last week’s transaction valued Trump’s group at an initial amount of $ 875 million. By Friday, the company’s public valuation had climbed to $ 1.64 billion.
The stock, which started trading on Oct. 19 at just over $ 9.95 a share, closed at $ 94.20 on Friday, more than nine times its initial price. Including warrants – or securities that can be converted into shares – Trump’s shares have risen by more than $ 108.
Reddit day-traders have embraced the former president’s new social media venture, with many saying they bought the stock as part of their political backing. Trump Media has pledged to end “censorship” of mainstream media and create a on-demand streaming service with “non-awakened” entertainment.
Trump also said his company would compete with big tech platforms such as Facebook, Instagram and Twitter, where he was banned.
“YOU ARE SITTING ON A GOLD MINE !!!! Wrote a poster on the Reddit website dedicated to the action. “I’m not selling! Twitter banned the president and allowed the Taliban to have an account! It’s more than a stock! It’s about your digital freedoms! We are just getting started !!! ”
Among the more traditional investors listed in the files were Saba Capital, led by well-known hedge fund manager Boaz Weinstein. However, after learning of Trump’s affiliation in the merger agreement, Saba Capital sold almost all of its shares on Thursday, according to the New York Times.
Other investors included Capital of Hudson’s Bay, which is led by Sander Gerber, a major donor to conservative causes and a 1989 graduate of the University of Pennsylvania.
Trump says he plans to start with a social network called Truth Social, but wants to grow into a conglomerate in competition with Disney and CNN.
But is it a good long-term investment?
“It’s GameStop once again,” said Brad Adgate, former Comcast executive and media consultant, based in Cambridge, Mass., Referring to the popular stock “meme” that skyrocketed earlier this year.
Trump’s new company went public by merging with what is known as a “blank check” company – or a special purpose acquiring company – and within days its value multiplied.
These companies increased in number earlier this year, often as part of an enrichment program, but they’ve fallen behind lately, suggesting investors will want to see real returns.
The stock could stay up in the air like GameStop did – going from $ 10 per share in 2020 to over $ 340 per share and now to $ 170.
But at the end of the day, the share price should depend on the company’s earnings, Adgate said.
“If it’s a subscription media company, then we’ll see. He has notoriety and takes advantage of it. In addition, he needs money and takes advantage of the instant wealth that can be accumulated through an after-sales service. Plus, he has millions of dedicated followers who will do what he asks, ”Adgate said. “But will that support this price?” “
However, regulatory filings and a presentation of the company show that there were a lot of questions about the underlying business.
The Securities and Exchange Commission, Wall Street’s financial regulator, exchanged several letters with the company in August, asking for clarification on its unaudited financial data and negative cash balance. As of March 31, 2021, the Company had $ 25,000 in cash and offering costs of $ 62,500.
“We note that the second paragraph of the audit report refers to the working capital deficit as of June 30, 2021,” the SEC letter said. “We also note that the financial statements and accompanying notes to the financial statements for the period ended June 30, 2021 are not labeled as unaudited. However, the audit opinion does not cover the financial statements for the period ended June 30, 2021. Please clarify and revise to provide an audit report consistent with the audited financial statements included in the file.
This did not deter a shareholder, who posted on Reddit: “LOL outlets with their “meme” labels. Sorry boys, an uncensored social network with Trump isn’t a meme, it’s about to retire soon.“