Judd Legum writes:

On Monday, Trump Media & Technology Group (TMTG) announced that Congressman Devin Nunes (R-CA) will be retiring from Congress to become the company’s CEO in January. Nunes has no experience in the media business and once sued a fictional cow for making fun of him on Twitter.

Writing in Bloomberg, Matt Levine concludes there is “almost no sign that TMTG is actually building a social network or a streaming platform or anything else.” Nevertheless, TMTG projects 121 million monetizable users and $3.6 billion in revenue by 2026. (In 2021, it more conservatively projects $1 million in revenue.)

Will TMTG’s rosy predictions come true? It seems very unlikely. But, critically, Trump does not have to meet these projections — or even stand up a real company — to make lots of money.

Just a few weeks after TMTG launched, it announced that it was merging with Digital World Acquisition Company (DWAC), which is a publicly-traded Special Purpose Acquisition Company (SPAC). A SPAC, also known as a blank check company, is formed specifically to merge with another company and take it public. In this case, investors in DWAC would pay Trump $293 million in exchange for 18% to 25% of TMTG, which doesn’t really operate yet as a business.

Prior to merging with TMTG, a share of DWAC was valued at $10. Shortly after the merger was announced, DWAC stock, perhaps buoyed by Trump fans, was trading as high as $175 per share. It has since settled in at around $43, which still values TMTG at almost $1.6 billion. That’s not bad for a company that has no product, no users, no publicly identified executives, and no revenue. It is trading at $43 because that is what people are willing to pay for it.

TMTG has not “completed its merger with DWAC or made associated securities filings.” But if the deal closes in the first quarter of 2022, Trump and DWAC investors are likely to make a lot of money. Trump will get the proceeds from the initial deal and the investors will be able to realize a return by selling their shares. Trump will collect his money long before anyone figures out if TMTG is a real company — much less a profitable one. [Continue reading…]