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| | Hi Friend, Hey Buddy Can You Spare A Dime ... Or Make That Half a Billion Dollars ...
I guess we have all been there.. You start the week struggling to find half a billion dollars, then suddenly six come all at once. Better than real estate, the Trump fortunes were boosted by a social media maxi-meme valued, at one stage last week, at over $10 billion dollars. The move valued DJT's personal stake at $6 billion, catapulting Donald Trump into the top billionaires list ranking alongside George Lucas and Georgio Armani.
They say you can't beat the market. You can't beat a social media application and nothing beats a maxi-meme. It's much more fun than real estate. You don't have to dress the figures or overstate the floor space. The market's imagination and momentum does the job. Trump's Media & Technology Group Corp. [TMTG], the main product of which is Truth Social, has been absorbed into Digital World Acquisition Company. DWAC is a SPAC, we hope its not a dog but more on that later.
The initial share deal valued TMTG at $875 billion. Not bad for a business, which reported a net loss of $58 million in 2023, with total revenue of $4.1 million in that time.
Not bad for a business which brings in little revenue, posts zero profit and has no indication it has a path to profitability that would justify a valuation of almost $1 billion, let alone a valuation of over $10 billion which the stock hit in the first week of trading.
Not bad for a business which did not provide the Digital World Board with financial projections in connection with the due diligence process.
Not bad for a business which has identified a material weakness in its internal control over financial reporting. The acquisition prospectus explains, Digital World may not be able to accurately report its financial results in a timely manner, which may adversely affect investor confidence and materially and adversely affect business and operating results.
Not bad for a business which does not currently, and may never, collect, monitor or report certain key operating metrics used by companies in similar industries. KPIs like sign ups, average revenue per user, ad impressions, monthly and daily active users. That sort of thing.
Why not? The prospectus explains, "Since its inception, TMTG has focused on developing Truth Social by enhancing features and user interface rather than relying on traditional performance metrics."
"While many industry peers may gather and report on these or similar metrics, given the early development stage of the TMTG platform, TMTG's management and board has not relied on any particular key performance metric to make business or operating decisions."
"At this juncture in its development, TMTG believes that adhering to traditional key performance indicators, could potentially divert its focus from strategic evaluation with respect to the progress and growth of its business."
"TMTG believes that focusing on these KPIs might not align with the best interests of TMTG or its shareholders, as it could lead to short-term decision-making at the expense of long-term innovation and value creation.
No short-termism in the TMTG board room.
Well there you have it. No short-termism in the TMTG board room. Working for the long term to justify the market faith in the business. Presumably advertisers will have to take the performance figures in good faith or be prepared to lob a bit of cash into the Donald Trump coffers to make good the revenue targets.
Not bad for a business which cannot assure investors that TMTG will effectively manage TMTG's growth. If TMTG fails to effectively manage its growth, business and operating results could be harmed. Another warning. Page 126 Prospectus.
Not bad for a business which is now a Donald Trump company. The prospectus warns there are a number of companies that were associated with President Trump have filed for bankruptcy, including one with a DJT Ticker. The ticker symbol "DJT" was also previously used by Trump's Atlantic City casino business, Trump Hotels and Casino Resorts, which went public in 1995 and eventually filed for bankruptcy in 2004.
The prospectus warns, there can be no assurances that TMTG will not also become bankrupt. The use once again of the DJT Ticker for TMTG, may well serve as a mega-warning from a mega-meme.
I could have been so different. DWAC considered fifteen different deals in view of delays with TMTG. The Prospectus reveals Digital World sent an NDA to Target B, an American pet care company offering a technology platform to enable on-demand and scheduled dog walking, training, and other pet care services. In the end target B walked with another suitor.
So there you have it. DWAC could have morphed into a doggie app. Cynics argue, there's time yet. Doggie App or Maxi Meme?
Post Note ...
DJT closed at $48.66 last night, down 40% from peak last week as the company announced "TMTG expects to incur operating losses for the foreseeable future," according to yesterday's filing with the Securities and Exchange Commission.
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| | Notes On The Art Of The Deal ...
Digital World [DWAC]
Digital World [DWAC] is a special purpose acquisition company [SPAC] formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganisation or similar business combination with one or more businesses. Digital World was incorporated under the laws of the State of Delaware on December 11, 2020.\
In September 2021, the SPAC raised approximately $300 million dollars by the issuance of around 30 million shares marked at $10 dollars per share.
Trump Media & Technology Group Corp. [TMTG]\
Trump Media & Technology Group Corp. [TMTG] is a Delaware corporation which aspires to build a media and technology powerhouse to rival the liberal media consortium and promote free expression.
TMTG was founded to fight back against the big tech companies, Meta (Facebook, Instagram and Threads), X (formerly Twitter), Netflix, Alphabet (Google), Amazon and others. TMTG was incorporated under the laws of the State of Delaware on February 8, 2021.
TMTG's first product, Truth Social, is a social media platform aiming to disrupt big tech's control on free speech by opening up the Internet and giving the American people their voices back. Truth Social was generally made available in the first quarter of 2022.
Valuation
At the time of valuation, the median enterprise value of the available "Trading Comparables" surpassed $324 billion. Specifically, the enterprise value of Twitter (now known as X), the closest competitor to TMTG's initial product, Truth Social, was $41 billion. Therefore, at such time, Digital World's management concluded that an initial valuation of $875 million, with the potential for an additional earnout of $825 million, was a reasonable assessment for TMTG's enterprise valuation in the Business Combination transaction. |
| | Bit Rich That! Hope you had a great Easter break. That's all for now. Have a great week ahead ...
John
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| To understand the markets, you have to understand the economics ...
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