A little-known way Trump was able to raise money to pay his legal bills

Shares of former President Donald J. Trump’s social media company could start trading on the stock market as early as Monday, which would immediately increase his net worth by about $3 billion — a wealth that Mr. Trump may be able to rely on his mounting legal bills as he seeks a second presidential term.

Trump must urgently come up with cash on Monday to cover a $454 million fine imposed by a New York judge who ruled he fraudulently inflated the value of his real estate in dealings with banks . Earlier this week, he asked an appeals court to suspend the sentence or accept a much smaller bail amount. Last year, one of his political action committees spent $50 million on legal bills.

The upcoming public debut of Trump Media & Technology Group — the parent company of the digital platform Truth Social — could provide Mr. Trump with a way to raise money, but it won’t be easy.

Trump Media is going public by merging with a publicly traded company company called Digital World Acquisition Corporation. Digital World shareholders are expected to approve the merger on Friday after years of delays caused by regulatory and criminal investigations that nearly derailed the merger.

Under the terms of the merger agreement, major shareholders of Trump Media are not allowed to sell their shares for six months. The so-called lockup provision, which generally applies to any company going public, is intended to limit the number of shares available for sale and trading, and also to avoid the perception that early shareholders do not have confidence in the future of the company.

But because Mr. Trump has enormous power over the company with his stake of more than 60 percent, and because his brand is crucial to Trump Media’s success, he could try to circumvent those provisions. Mr. Trump could ask Digital World’s board to lift its restrictions on stock sales before voting on its planned merger with Trump Media.

Or he could wait until Trump Media starts trading before asking his board members — some of whom also sit on Digital World’s board — to waive the lockup period. Trump Media’s seven-member board is likely to be receptive to such a request, in part because it is expected to include three former members of his administration. His eldest son, Donald Trump Jr., will also join the board.

Mr. Trump could also get the board’s blessing to transfer his shares to a trust or give them as a gift to a family member. By placing them in a trust, Mr Trump will be able to use the shares as collateral for a loan; a family member could also borrow against those shares.

If Friday’s shareholder vote goes as expected, Trump Media will begin trading under the stock symbol “DJT” next week. Based on Digital World’s current share price, Trump’s 79 million shares will be worth more than $3 billion, on top of the $2.6 billion that Forbes rated Mr. Trump was worth in October.

But it’s hard to predict how Trump Media’s stock will trade, considering it’s currently losing tens of millions of dollars and generated just $3.3 million in advertising revenue in the first nine months of last year.

Once the merger is complete, Digital World’s approximately 400,000 shareholders – most of them – will become part of Digital World individual investors – will become shareholders of Trump Media. And many Digital World shareholders have long been boosters of the stock — and Mr. Trump — on Truth Social. From January, as Trump moved closer to securing the Republican nomination and the likelihood of the deal’s approval increased, Digital World’s shares have soared, up more than 140 percent this year, increasing the former president’s stake became more valuable.

For Truth Social, the merger will allow the social media site to “broaden the realm of free speech and vigorous debate at a time of unprecedented censorship by Big Tech and by the government itself,” a Trump Media spokeswoman said.

Trump Media, based in Sarasota, Florida, came into being in an almost unlikely way. In early 2021, two former contestants on his old reality TV show “The Apprentice,” Andy Litinsky and Wes Moss, hatched a plan to create a conservative media giant around Mr. Trump after he was banned from what was then called Twitter. the aftermath of the January 6 attack on the US Capitol.

Trump was enthusiastic about the idea and just weeks later an agreement was signed. Mr. Litinsky and Mr. Moss would provide consulting services to the new entity, called Trump Media, while Mr. Trump would lend and endorse his brand — in return taking a majority stake.

Truth Social, which has become Trump’s main megaphone for pillorying his critics and political opponents, launched in 2022 as part of Trump Media. The company signed a licensing agreement with Mr. Trump early on to ensure he would post on Truth Social and not other platforms.

The goal was always to take Trump Media public through a merger with a special purpose acquisition company, or SPAC. The sole purpose of such companies is to raise money from investors and merge with an operating company, which then becomes the publicly traded entity.

Digital World, a SPAC run by Florida businessman Patrick Orlando, had gone public in September 2021 and raised $300 million from investors. The following month it announced a merger with Trump Media, but soon afterward it was discovered that Mr. Orlando and Trump Media representatives had begun deal talks months before Digital World’s IPO. Securities rules prohibit SPACs from engaging in meaningful merger discussions before going public.

The Securities and Exchange Commission opened an investigation into those deal talks and Digital World later agreed to pay an $18 million fine to the regulator, a settlement that allowed the deal to go through.

A lawsuit filed in February by Mr. Litinsky and Mr. Moss, who alleged that Trump Media was trying to reduce their stake, had also threatened to delay the merger before the judge in the case indicated he would let the deal go through while the dispute is being resolved. .

Beyond the immediate personal benefit to Mr. Trump, the biggest question now facing Trump Media is its business future, and what it plans to do with the $300 million that will be transferred from Digital World if the merger is approved .

The deal benefits not only Mr. Trump, but also Truth Social and Trump Media, which have used up most of their available cash. Truth Social remains a relative minnow in the social media universe compared to much larger platforms like X (formerly Twitter) and Meta’s Facebook, Instagram and Threads. So far, about 10 million people have downloaded the Truth Social app – all in the United States, according to data provider Sensor Tower.