Breakingviews: Trump app is ultimate art of the SPAC deal

Donald Trump and blank-check vehicles were made for each other. Like many executives drawn to special-purpose acquisition companies, the former U.S. President would struggle to launch a regular stock market offering. He’s also embraced the SPAC habit for rosy projections by valuing his yet-to-be-launched social network at $1.7 billion. For securities regulators, Trump could be the ultimate test.

Unlike most SPAC deals, details of the merger between Trump Media & Technology and listed Digital World Acquisition Corp are scant. It values Trump’s firm an initial enterprise value of $875 million, the companies said on Wednesday. DWAC will provide the $293 million it raised from investors last month, assuming shareholders don’t withdraw their cash. There’s a potential additional earnout of $825 million, but no information on the performance metric. Trump is chairman but hasn’t identified a chief executive.

A more fundamental problem is that Trump’s platform, to be called Truth Social, doesn’t exist yet; a beta version will launch next month. The company will eventually establish a streaming service and news programming to compete with Netflix and CNN, according to a presentation.

Yet investors are banking on Trump reassembling his former social media following. He had nearly 89 million followers on Twitter and 33 million on Facebook when he was kicked off those platforms in January, when he was accused of inciting violence that led to the riots at the Capitol building. DWAC shares almost doubled in mid-morning trading on Thursday.

It’s not Trump’s first stock market foray; Trump Hotels and Casino Resorts went public in 1995. However, his multiple bankruptcies don’t bode well, and he has run his private Trump Organization as a family enterprise answering to him.

Social media can also be dicey for outspoken business chiefs. Tesla boss Elon Musk paid $20 million in 2018 to settle allegations of fraud related to his tweets. A Trump-led listed company would represent a whole new level of regulatory risk. He’s still one of the subjects in a case against the Trump Organization, which was charged in July by Manhattan’s district attorney for failing to pay taxes on employee perks. And he’s mulling a presidential run in 2024.

The former commander-in-chief has a devout following, which should help user engagement. But how his platform plans to make money is a mystery. That makes Trump the ultimate art of the SPAC deal.