Trump SPAC is masterclass in political workarounds

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Former U.S. President Donald Trump looks on during his first post-presidency campaign rally at the Lorain County Fairgrounds in Wellington, Ohio, U.S., June 26, 2021. REUTERS/Shannon Stapleton/File Photo

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NEW YORK, Dec 7 (Reuters Breakingviews) - Donald Trump already blurred the line between entertainment and politics. A merger between a blank-check firm and his new media venture adds finance to the mix. If the plan comes to fruition, his backers may have a new way to support the former president’s agenda – and advance the prospects of political candidates he favors – without the usual campaign finance strictures, and with the prospect of making a profit to boot.

Trump Media & Technology said on Saturday that it had raised $1 billion from an unnamed group of investors, on top of the $250 million it will get from merging with Digital World Acquisition (DWAC.O), a special-purpose acquisition company read more . Trump’s company plans to use this haul to bankroll a social media venture called Truth Social, billed as a network that doesn’t discriminate based on political ideology.

Strictly speaking, Trump Media is not a campaign vehicle. Indeed, as a for-profit company incorporated in Delaware, it will be obliged to serve shareholders. But there’s no mistaking that Truth Social’s world view will be close to Trump’s own. The former reality TV host on Monday appointed former Congressman Devin Nunes, an ardent supporter who voted against certifying Joe Biden's 2020 presidential election victory, as Trump Media’s chief executive.

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Trump has plenty of experience raising money from rich supporters, so his ability to command sizeable sums is nothing new. But channeling investments into a listed company that can facilitate and engage in political debate, and in which Trump acts as chair and “company principal,” could amount to a leap forward in campaign financing strategies for his supporters.

Consider the traditional ways a rich individual in the United States can help an aspiring politician make it into office. These are many and varied, but most have drawbacks. A supportive plutocrat can donate to a so-called “super PAC,” or political action committee, without limit. But these must disclose the identities of their donors. Alternatively supporters can put money into a nonprofit vehicle called a 501c, which can be anonymous, but is restricted in the extent of its political activity. Donors frequently circumvent these rules, but not without effort. Around $1 billion of such “dark money” was spent during the 2020 election, according to That’s less than Trump Media will have after its merger with Digital World.

Trump hasn’t disclosed the identities of his new investors, and under Securities and Exchange Commission rules they will remain below the radar so long as they have less than 5% of the company, equivalent to more than $100 million based on the valuation at which the deal with Digital World was struck. Outsiders have no way of knowing whether small shareholders in a listed company are American or foreign, governmental or private. Trump can’t use the money for his political campaigns, but Truth Social could create a durable platform that would raise the visibility and electoral fortunes of candidates present and future.

The Federal Election Commission, which oversees campaign financing, would be unlikely to take issue. One reason is that it has granted exceptions for media companies. The watchdog ruled recently that social network Snapchat didn’t unfairly boost President Joe Biden when it blocked Trump from its news-feed page, since owner Snap (SNAP.N) was acting in its own commercial interest. Trump’s platform could use that defense to argue that its decisions on who can say what and to whom are merely attempts to profitably serve its customers. The FEC exemption would fall away if Trump were actively running for office while controlling or owning the company, but he has not thus far officially declared himself a candidate for any election.

The biggest draw for a donor-turned-investor might be that Trump’s new company could deliver a financial reward through dividends and share-price gains. Since it is offering shares to investors at below the market price, some could pocket a quick-fire profit by selling as soon as they are able. Traditional campaign vehicles don’t deliver a return on investment – at least, not a monetary one.

Running a stock market-listed company comes with other onerous obligations, such as complying with U.S. securities laws. Wall Street’s top financial regulators are already investigating the deal between Trump Media and Digital World, the blank-check company disclosed on Monday. However, fielding filing requirements and dealing with watchdogs are mainly a concern for the company rather than its shareholders.

The upshot is that, for an investor who shares Trump’s worldview and wants to help spread the word, there’s functionally not much difference between Trump Media and a campaign vehicle. And his venture brings a slew of added perks from anonymity to a potential profit, plus, presumably, the former president’s gratitude. It remains to be seen whether Trump has the nous to create a successful social network, but he remains a master of using financial ambiguity to his best advantage.

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- Wall Street regulators are investigating former U.S. President Donald Trump’s plan to merge his new social media venture with a listed special-purpose acquisition company, or SPAC.

- Digital World Acquisition, the blank-check acquisition firm that agreed to acquire Trump Media & Technology Group, disclosed in a regulatory filing on Dec. 6 that the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority were probing the deal.

- Digital World and TMTG said on Dec. 4 that they had struck agreements with “a diverse group of institutional investors” to contribute $1 billion of capital through a so-called private investment in public equity, or PIPE.

- TMTG said on Dec. 6 that Devin Nunes would step down as a U.S. representative to join as its chief executive in January. Nunes, a Trump ally, is the top Republican on the House Intelligence Committee.

- Shares in Digital World were trading at $48.03, up 9.6%, by 1130 EST (1630 GMT) on Dec. 7.

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Editing by Peter Thal Larsen and Amanda Gomez

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