Former President Donald Trump is about to get richer by $3 billion thanks to the merger of his social media company Truth Social with Digital World Acquisition Corp. DWAC. However, CNBC’s Herb Greenberg thinks DWAC is a "meme stock on steroids."
What Happened: Trump Media & Technology Group, which runs Truth Social, will become a publicly traded company after majority shareholders of DWAC approved its acquisition, according to the company's SEC filings.
Trump will have a 58% stake in the merged entity, which would be worth nearly $3 billion, according to Benzinga Pro.
However, according to Greenberg, the only people who are buying this stock are those who would buy meme stocks based on what they read on message boards and forums.
"It's based on what you can see on any stock message board, where people are basically saying ‘to the moon,'" Greenberg said, CNBC reported.
"To the moon" is a popular term used on message boards, hyping up meme stocks and cryptocurrencies. It was popularized during the GameStop Corp. short squeeze, along with other terms like "paper hands" and "diamond hands" on the r/WallStreetBets subreddit.
Beyond the meme stock phenomenon, Greenberg also thinks there is a political undertone to DWAC.
"It is all about politics to many of these people. That… in this case, turns into a no-win for everybody but, possibly… Donald Trump, because if he ends up selling, that's a no-win for investors."
DWAC is said to have links to a China-based entity called ARC Group, which is listed as the "Sponsor" and stockholder in the company's filings, with a 7.8% stake in the merged entity. A 2022 report by Reuters claims that ARC Group is a China-based financier. The company's website reveals it has offices in four cities in China, including Shanghai.
Why It Matters: The Trump Media-DWAC merger has been mired in regulatory issues and was first announced more than two years ago.
However, its approval comes at a crucial time for Trump, who has to post a $464 million bond by March 25.
That said, the merger might not rid Trump of his legal troubles. He is barred from selling shares of the merged entity for six months from the date of the merger, according to the filings.
Trump might still be able to secure a loan by putting up his stock in the company as collateral, though, but the clock is ticking for the former president.
Photo via Shutterstock
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