Krystal Hu

(Reuters] – The former president Donald Trump’s latest social media venture seeks to raise as much as $1 billion. It sells shares to families and hedge funds, at many times the price it received in October in a deal that was made with a blank-check acquirer firm.

Trump Media & Technology Group, which has yet to roll out the social media app it says it is developing, already stands to receive $293 million if its deal to list in New York through a merger with blank-check firm Digital World Acquisition Corp is completed.

Trump Media was valued at $875million, with debt. According to sources, Trump Media now seeks to raise an additional $1Billion at close to $3B, in order to take advantage of Digital World’s stock rally, which was triggered by Trump supporters and day traders snapping up the stock.

This is the most obvious indication that Trump and Digital World dealmakers want to capitalize on the market excitement surrounding their venture. It has been fuelled by ambitious goals and not a company that is already in operation.

The deal between Trump Media and Digital World valued Digital World shares at $10 per share. Trump Media wants to obtain a “private investment in public equity” (PIPE) to value Digital World shares at a lower price than their current $40. This is a significant departure from other PIPE deals that are usually done at $10 per shares and will result in a greater dilution for existing Digital World investors.

According to sources, Digital World shares might be valued using a discount of 20% on their average 10-day volume weighted price.

Because the information is confidential, sources asked for anonymity. Trump Media and Digital World didn’t respond to our requests for comment. Bloomberg News reports that companies are seeking to raise a PIPE but have not provided any information about the terms.

Most PIPE transactions take place before a deal is made to make a company go public. This makes it unlikely that they will be able to raise the full $1 billion they seek after their announcement. Sources said that many Wall Street firms turned down the investment opportunity and most of those participating in the secret road shows for PIPE were family offices, hedge funds and wealthy individuals. The wealth of the wealthy and their families is managed by family offices.

One of the reasons for the attraction of Trump’s deal is his reticence to be associated with him after he was barred from social media sites for encouraging Trump supporters to join the Jan. 6 attack against the U.S. Capitol. This attack was motivated by unsubstantiated claims that there was widespread fraud last year.

Some hedge funds, like Saba Capital Management, Lighthouse Investment Partners and Lighthouse Investment Partners that supported the Digital World launch have now said they had sold their shares to disengage from Trump’s deal.

There is also regulatory risk associated with the deal. U.S. The U.S. SEC refused to discuss whether or not it planned any action.

Trump Media & Technology Group and Digital World have asked investors to finalize commitments to the PIPE by the middle of December, the sources said.

One of the sources asked investors to make a commitment between $10 million-$20 million at a PIPE Road Show. According to a source, neither Trump nor Digital World executives attended the presentation. David Boral, OTC:, was leading the investor presentation. He is the president of EF Hutton which advises Digital World. A Trump Media & Technology Group representative was also in attendance, the source added.

Trump was also involved personally. According to two sources, Trump has called investors asking them to commit to the PIPE in excess of $100 million.

Sources said that investors who attended the roadshow were presented with a demo of the TRUTH social app. This looked like a Twitter account (NYSE:).

BIG PLANS

Trump stated that he will launch his own social media platform to protest the company’s decision to block him from using their platforms. According to his presentation, he had over 89 million Twitter followers, 33 million Facebook users (NASDAQ:), and 24.5 millions on Instagram when he was banned.

Trump’s defeat last year has led him to hint that he could run again for presidency in 2024.

Before the Trump media deal, special purpose acquisitions companies like Digital World lost much of its appeal with investors. After the failed financial projections of SPACs merged, many investors lost a lot.

TRUTH Social is scheduled for a full rollout in the first quarter of 2022, and is the first of three stages in the Trump Media & Technology Group’s plans, followed by a subscription video-on-demand service called TMTG+ that will feature entertainment, news and podcasts, according to the news release.

The company’s slide show on its website shows that it envisions competing with Amazon.com (NASDAQ)’s AWS cloud services and Google (NASDAQ) Cloud.