Donald Trump’s social media start-up has raised $1bn from unidentified investors as the company presses ahead with plans to go public via a Spac merger.
Trump Media and Technology Group said on Saturday that it had raised $1bn in private investment in public equity (Pipe) financing, but did not name any investors.
In October, the former US president announced the launch of Truth Social, a social media platform with no existing app which intends to list through a Spac merger in New York. The move comes as Trump remains banned from Twitter, Facebook and YouTube following the January 6 attack on the US Capitol, and as the frenzied Spac market has cooled significantly in recent months.
Trump said: “$1 billion sends an important message to Big Tech that censorship and political discrimination must end.”
“As our balance sheet expands, TMTG will be in a stronger position to fight back against the tyranny of Big Tech,” he added.
The TMTG start-up, for which Trump is chair, will merge with blank cheque company Digital World Acquisition Corp which is run by Patrick Orlando. The Spac raised $293m when it listed on the Nasdaq exchange in September and eleven hedge funds, including Saba Capital and DE Shaw, led by prominent Democratic party donors, participated in the offering, according to regulatory filings.
The deal’s Pipe financing far exceeds the Spac IPO proceeds and is in the form of convertible preferred stock. The conversion price is set at a 20 per cent discount to the Spac’s five-day trading average share price before December 1, which sets the conversion price at roughly $35. Digital World has traded as high as $94 per share and the hedge fund group made millions when it first listed on the Nasdaq exchange.
Shares of Digital World have soared well above their $10 per share listing price in anticipation of the Trump media venture. Typically Pipe investments are announced alongside the business combination. However, because Digital World has waited to raise institutional capital, it has been able to take advantage of the hype to sell the Pipe shares at far higher than the traditional $10 per share price.
The Pipe’s stock price may increase or decrease depending on how Digital World trades and the proceeds between the Spac and the Pipe are expected to provide $1.25bn to TMTG after expenses. The Spac shareholders will have the customary option to get their money back prior to the merger closing if they request.
TMTG’s Truth Social platform currently has no app or business plan but describes itself as allowing conversation “without discrimination on the basis of political ideology”.