Trump Media and Technology Group hasn’t shown much yet, but investors still seem to think this company is worth four times more than everything former president Donald Trump owns.
At the age of 75, Donald Trump accumulated a fortune in skyscrapers, hotels, golf courses, and more, with an estimated value of $2.5 billion after debts were deducted. Then he quickly came up with a new business idea, Trump Media and Technology Group. Although it hasn’t shown much yet, it is planning to launch a social networking company and other business projects.
Investors have valued the company at about $10 billion.
This valuation comes from people who care and invest in stocks every day. While they cannot yet buy stock in Trump Media and Technology Group, they can buy shares in a “shell,” also known as a special purpose acquisition company (SPAC), that plans to merge with Donald Trump’s business. Over the past month, news of the merger has pushed this SPAC’s stock price up from about $10 to $60.
Illustration: Forbes. Photo: Evan Vucci/Ap
If the stock remains at $60, SPAC shareholders will receive an estimated $2.2 billion interest in the combined company. Investors of 15 million warrants tied to the SPAC will receive an additional $300 million.
It is unclear how much the former US president personally owns in the business, but his company’s owners will now receive an estimated 86 million shares worth $5.1 billion as part of the deal. favorable.
Assuming the price per share remains above $30 for about 45 days after the merger, the owners of Mr. Trump’s group will receive 40 million additional shares, worth $2.4 billion at current prices. In total, they will receive nearly 10 billion USD.
Investors are pouring a lot of money into companies that are not yet established. In general, they tend to overvalue SPAC companies, which are structured to dilute everyday stock pickers.
In an April 2021 report, researchers from Stanford University and New York University studied 16 SPAC companies that merged in 2019-2020 and traded for at least 12 months after the merger. These companies lost an average of 35% of their value, even as the total market grew.
“This is just a SPAC company with its value inflated many times over,” said Michael Klausner, study co-author and professor of Business and Law at Stanford University.
For a business that does not have real products and financial records, the above statistics are calculated differently. Twitter, which says it displays ads to about 211 million users every day, is worth $40 billion.
In other words, investors value social media businesses at about $189 for each person who sees the ads they reach each day. If one-third of Donald Trump’s 89 million Twitter followers became daily users of his platform, they would value Trump Media and Technology Group as Twitter. Theoretically, the company would be worth $5.6 billion.
At this point, Trump Media and Technology Group still needs to create products. In October 2021, the company revealed its plan to take down Twitter with the social network Truth Social.
But almost immediately, pranksters allegedly logged into the first version of this social network, and posted a video of a “defecating” pig named “donaldjtrump”. Just shortly after, the site was shut down.
Source: Minh Tuan | Vietnambusinessinsider
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