Former President Donald Trump’s new “non-woke” social-media stock was still climbing on Friday, after exploding out of the gate a day earlier. But the Trump deal for the special purpose acquisition company, or SPAC, already was raising eyebrows about the speed of the pact and questions about competition.
Trading was halted several times on Friday, amid the surge higher. The Trump SPAC came in chatter on WallStreetBets. However, the exact influence of the Reddit board, credited as the heart of this year’s meme-stocks craze, was unclear, as were the identities of the posters.
Assuming the SPAC deal clears, Trump’s plans, for now, include a social-media platform, called TRUTH Social, and a subscription video service. In using his platform as the former president, his media company, Trump Media & Technology Group, said it hopes to unify what it called a “fragmented” universe of conservative media outlets and compete against the likes of Facebook (FB) and Netflix (NFLX).
Those moves, however, would follow a long list of financial difficulties and business blunders for Trump.
“He’s made money in real estate,” said Wedbush analyst Michael Pachter, who has covered the social-media industry. “And this is not real estate.”
Trump SPAC Deal Terms
SPACs already trade publicly. Their sole purpose is to merge with a private company and, in turn, take that company public. More companies have pursued going public via a SPAC. The process is seen as less rigorous than a traditional initial public offering.
On Wednesday, Trump Media & Technology Group said it had entered into an agreement to go public via a merger with Digital World. The deal values the combined company at $875 million, with a possible earn-out of $825 million in extra shares, according to a release outlining the Trump SPAC deal.
Growth plans for Trump’s media company will be funded by $293 million in cash in trust from Digital World.
The media outlet, of which Trump is chairman, was formed in Delaware in February, according to state records. A release on Wednesday said that company intended to “create a rival to the liberal media consortium and fight back against the ‘Big Tech’ companies of Silicon Valley, which have used their unilateral power to silence opposing voices in America.”
Trump Media & Technology said it would launch TRUTH Social in the days ahead. It plans a beta launch in November, according to the release, with a nationwide launch expected in the first quarter.
Trump Media & Technology also said it planned to launch a subscription video platform, called TMTG+. The service, it said, would feature what it terms non-woke “entertainment programming, news, podcasts, and more.”
‘That’s Very Fast’
Digital World’s Chief Executive is Patrick Orlando. Orlando also heads up a SPAC called Yunhong International and is a former derivatives trader at Deutsche Bank, according to Bloomberg. The New York Times reported that Orlando knew Trump before the deal.
Scott St. John, a longtime TV producer, will head up the corporate operations of TMTG+, the release said.
Trump’s social media interests, whatever they amount to, would follow Twitter‘s (TWTR) decision to ban him from the platform following the Jan. 6 Capitol riots. They would also come amid speculation over a presidential run in 2024.
Digital World began trading publicly on Sept. 30, some three weeks before it announced the deal with Trump’s media company.
“Between the SPAC’s IPO and this announcement (about three weeks), that’s very fast,” said Michael Klausner, a professor of law at Stanford. That process, he said, can typically take months or well over a year.
Digital World and Trump Media did not immediately respond to questions about how the deal came together. Nor did they comment on whether they’d planned to merge prior to Digital World’s public debut.
Trump SPAC Competition
A Trump-backed social media outlet would face some heavy competition: Facebook, Instagram, Snap (SNAP), Twitter and TikTok.
Pachter noted that among those, Facebook arrived first. The others, he said, managed to do something a little different with online social interaction.
“I don’t know that TRUTH Social has any chance, ever, of competing with Facebook, Twitter, Snap. Because it’s not inclusive,” he said. “It’ll be conservative only. We already have our echo chambers.”
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