Given Donald Trump’s history of bankruptcies and defaults, the former president could not go to the bank for a loan. So he took a familiar path down Shady Lane to fund his new social media company.
Trump’s big deal involved, according to The New York Times:
‘Two former Apprentice contestants [Wes Moss and Andy Litinsky aka Andy Dean], a small Chinese investment firm, and a little-known Miami banker named Patrick Orlando.’
The deal meant he had to buy a special purpose acquisitions company or a SPAC, in this case, Digital World Acquisition, because he needed money.
This is the way it worked. Investors bought SPACs’ shares in a kick-off public offering with little to no financial information. Then, the SPAC finds a company to merge with, but:
‘SPACs aren’t supposed to have a merger planned at the time of their I.P.O. [initial public offering].’
Litinsky and Moss:
‘[wanted to] create a conservative media powerhouse that will rival the liberal media and fight back against “Big Tech” companies of Silicon Valley.’
Securities and Exchange Commission (SEC) could be hot on Trump’s tail for those first talks with Orlando. As if that was not bad enough, Digital World’s securities filings lied multiple times, denying those conversations. It said it never had “substantive discussions, directly or indirectly” with the target company, meaning Orlando’s company. That is called “the omission of material information” and a huge problem.
Finance professor at Baylor University who studies SPACs Mike Stegemoller said, The Vanity Fair reported:
‘Financial markets are premised on trust. If these disclosures are not true, no one wants to participate in markets that aren’t fair.’
Orlando was a “former derivatives trader at Deutsche Bank and executive at a sugar merchant.” His original plan included:
- A social media app,
- Films,
- Events
Then, the second tier of Orlando and Trump’s plan would evolve the company into:
- A variety of technology services worth $15 billion.
- That would be a rival to “Netflix and the cloud divisions of Amazon and Google.”
The SEC Registration Form indicated:
‘In May, Digital World announced plans for an I.P.O. Like Benessere, Digital World was created with the help of ARC.’
Formerly a financial analyst and bankrupt fitness executive, Phillip Juhan said in May that he was Trump Media’s Chief Financial Officer (CFO). Should Digital World and Trump Media have had a deal in May, that would have been a violation of regulations for lies on their SPAC’s public statements. Talks before the Digital World IPO in September would have been illegal.
Last week, Digital World’s shares were worth about eight billion dollars.
Keep in mind that two of Trump’s anchor investors, D.E. Shaw and Saba Capital, bailed already. And investor Iceberg Research was “betting against the stock.”
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