Donald Trump
Trump's endorsement of Truth Social may not lift shareholders' spirits in the newly merged company Wikimedia Commons

On Saturday, Trump told his numerous online followers, "I love Truth Social." However, there might be a disconnect between Trump's enthusiasm and the feelings of shareholders as the company that recently merged with Truth Social saw a significant drop in its stock price the day before.

Digital World Acquisition Corp., a shell company, saw its share price fall by nearly 14 per cent shortly after shareholders approved a merger on Friday morning. The merger is with the former president's social media company, aimed at making it public.

Suppose the drop continues in the next few weeks. In that case, the value of Trump's majority stake in the newly merged company, known as Trump Media, might be a bit less than the estimated $3 (£2.38) billion or so (as estimated before shareholders signed off on the deal Friday).

DWAC's stock reached a high of $58.72 (£46.54) per share on January 23, as the merger seemed increasingly likely. However, it dropped to $44.20 (£35.03) per share as trading began on Friday morning, just before the shareholder vote.

DWAC shares concluded trading on Friday afternoon at $36.94 (£29.28) per share. The stock experienced a slight recovery to $38.55 (£30.55) per share in after-hours trading. However, this figure remained 12.7 per cent lower than Friday's opening price, according to a report by CNBC.

The decline could raise concerns regarding Trump Media & Technology Group's capacity to generate substantial revenue following the DWAC merger. It also reflects apprehensions about whether Trump will attempt to capitalise on his shares early, possibly due to his legal issues.

Financial performance of TMTG: A closer look

TMTG, the owner of the Trump Truth Social platform endorsed by Trump on Saturday and attempted to sell to Elon Musk, witnessed losses of nearly $50 (£39.63) million during the first three financial quarters of 2023. Revenue during that period amounted to less than $3.5 (£2.77) million.

Meanwhile, Trump faces civil legal judgments exceeding half a billion dollars in New York federal and state courts. Aside from mounting legal bills stemming from these cases, he also faces four criminal prosecutions while aiming to unseat President Joe Biden in November's election.

Trump's legal team, during the past week, stated in a court filing that he lacks the funds to secure an appeal bond for a $454 million fraud judgment in one of those cases. This move would temporarily prevent the New York Attorney General's Office from enforcing the award.

As part of the merger, Trump, holding at least a 58 percent stake in Trump Media, will be prohibited from selling shares in the company for six months. However, the newly appointed board of directors, which includes his son, Donald Trump Jr., and other close allies, has the authority to lift this restriction. This could enable Trump to sell shares sooner to cover his legal expenses.

Such actions trigger a decline in Trump Media's share price and encourage other shareholders to sell their stocks, exacerbating the drop in share prices. Trump Media is poised to trade on the NASDAQ stock market under the DJT ticker as soon as next week.

The same ticker symbol, DJT, was previously utilised for Trump's former publicly traded entity, Trump Hotels & Casino Resorts, which started trading on the New York Stock Exchange in 1995. However, the company consistently incurred losses and eventually filed for bankruptcy protection in 2004, coinciding with its delisting from the exchange.

In case you're wondering what Truth Social is, it is an alt-tech social media platform established by Trump Media & Technology Group, an American media and technology company founded in October 2021 by former US President Donald Trump.