A merger with a so-called blank check company is poised to give the former president access to hundreds of millions of dollars.
After decades of bankruptcies, loan defaults, business disputes and commercial failures — not to mention a polarizing presidency that ended with a violent mob storming the Capitol — Donald J. Trump was shunned by much of corporate America. Now, thanks to one of Wall Street’s hottest fads, the former president has managed to sidestep that tarnished reputation and gain access to hundreds of millions of dollars to launch a social media company. Riding to his rescue: SPACs. Special purpose acquisition companies are the reverse of initial public offerings. Sometimes called blank-check companies, SPACs go public first and raise money from investors with the goal of finding a private company to merge with. Those investors have no clue about what that merger partner will turn out to be. Which led some of the prominent investors in a SPAC called Digital World Acquisition — including the hedge funds D.E. Shaw and Saba Capital — to the surprising realization that they were financially backing Mr. Trump’s latest company. Mr. Trump’s new company, Trump Media and Technology Group — incorporated in Delaware in February with little fanfare, and with no revenue or tested business plan — reached a deal to merge with Digital World on Wednesday. Digital World, which was set up shortly after Mr. Trump lost the 2020 election, last month raised nearly $300 million, largely from big investors. Assuming the merger is consummated, that money will soon be bankrolling the Trump media venture, which plans early next year to offer a Twitter-like social media app. Shares of the newly merged company soared on Thursday, rising more than 300 percent to close at $45.50 a share and partly reflecting expectations that the former president’s media company could be very profitable. SPACs have long had a dubious reputation because they give struggling or untested companies that would otherwise not find backers a pathway to the public markets. But in recent years, these lightly regulated entities have become all the rage because with interest rates remaining low, investors are eager for new places to put their money to work. In the past two years alone, such companies have raised $190 billion from investors.
