Former US president Donald Trump's new social media venture is seeking to raise up to $1 billion by selling shares to hedge funds and family offices at several times the valuation they commanded in a deal with a blank-cheque acquisition firm in October.
Two people familiar with the matter told Reuters that the 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-cheque firm Digital World Acquisition Corp is completed.
The deal valued Trump Media at $875m, including debt, and the company is now seeking to raise up to an additional $1bn at a valuation of close to $3bn, to reflect Digital World's share rally after Trump supporters and day traders snapped up the stock, the sources said.
It is the clearest indication yet that Mr Trump and the Digital World dealmakers are seeking to capitalise on the market euphoria around their venture, which has so far been fuelled by its ambitious goals rather than a business that is up and running.
Digital World shares were valued at $10 each in the deal with Trump Media.
Trump Media is now looking to secure a so-called private investment in public equity (Pipe) that would value Digital World shares closer to their recent price, the sources said.
Weighing on the deal's appeal is the reluctance of many investors to associate with Mr Trump after he was banned from top social media platforms for encouraging his supporters to participate in the January 6 attack on the US Capitol, which was based on unsubstantiated claims of widespread fraud in last year's presidential election.
The deal also faces regulatory risk. Elizabeth Warren, a US senator, asked US Securities and Exchange Commission Chairman Gary Gensler last month to investigate the planned merger for potential breaches of securities laws around disclosure. The SEC has declined to comment on whether it plans any action.
Trump Media and Digital World have asked investors to finalise commitments to the Pipe by the middle of December, the sources said.
In a Pipe roadshow attended by one of the sources, investors were asked to commit between $10m and $20m. Neither Mr Trump nor Digital World executives made an appearance and the investor presentation was led by David Boral, president of EF Hutton, an investment bank that advised Digital World on the deal, the source said. A Trump Media representative was also in attendance, the source added.
Mr Trump has said he is launching his own social media app to stand up against the companies that have barred him from their platforms. He had 89 million followers on Twitter, 33 million on Facebook and 24.5 million on Instagram at the time he was blocked, a presentation on his company's website shows.
Since Mr Trump was voted out of office last year, he has repeatedly dropped hints that he might seek the presidency again in 2024.