In a recent merger agreement between Digital World Acquisition and Trump Media and Technology Group, the parent company of Truth Social, it was disclosed that the companies had a plan to address potential disruptive events, including the possibility of former President Donald Trump being convicted of a felony. This plan was outlined in a filing with the Securities and Exchange Commission, where the companies identified two key events that could impact their operations: Trump running for public office or being convicted of a felony.
Now, with Trump facing 34 felony charges and being positioned to become the Republican party’s presidential nominee, the companies find themselves facing both of these challenges. The contingency plan described in the SEC filing was vague, stating that the company principal’s ownership and position would be structured to eliminate the need for restructuring in the event of a material disruptive event. This language, specifically added for Trump, is not typically seen in merger agreements, according to finance experts.
Despite Trump owning 65% of the company and most of his net worth being tied up in it, he does not serve as the CEO or on the board of directors. Former Republican Congressman Devin Nunes holds the position of CEO, while Trump loyalists fill some board positions. This structure may be part of the company’s risk-management strategy, as it minimizes the impact of Trump’s legal issues on business operations, according to finance professor Jay Ritter.
For investors, Trump remains a significant draw, with the public markets valuing the business at $9 billion, despite generating only $4.1 million in revenue last year. After the verdict in Trump’s criminal case, supporters took to social media to encourage others to show their support by purchasing stock in Trump media. However, it is important to note that in November 2023, TMTG sued 20 media outlets, including Forbes, for reporting financial results while still a private company, indicating ongoing legal challenges for the company.
Overall, the merger agreement between Digital World Acquisition and Trump Media and Technology Group includes provisions to address potential disruptions, such as Trump’s legal issues and potential future political ambitions. The vague language in the filing has raised questions among finance experts about the specific details of the contingency plan. Despite these uncertainties, the company’s organizational structure and leadership may help mitigate any operational impact of Trump’s legal troubles, while the business continues to attract investor interest due to Trump’s involvement.
