IPO via a detour: Trump platform becomes an object of speculation


Status: 25.10.2021 4:40 p.m.

Former US President Trump is bringing his planned online network to the stock exchange through the back door. The share is in demand, but is considered highly speculative because investors know little about the company.

By Antje Passenheim, ARD-Studio New York

He’s making wind again: With his comeback plans, Donald Trump is whirling up Wall Street in New York from his golf resort in Florida. There the former US president wants to put his planned online network on financial ground. And indeed: before the new platform is even established, the shares associated with it will go through the roof. The trade in papers of the “Digital World Acquisition Corp” had to be temporarily suspended – this is how big the run of the speculators on the “Trump paper” is.

Antje Passenheim
ARD-Studio New York

But it doesn’t have to stay that way, my stock market watcher. Investment advisor Oliver Pursche from the advisory firm Wealthspire is also skeptical. “It was a mixture of luck, skill and foresight,” he says. “We know that Trump’s team was looking for an alternative media platform because he’s still banned from Facebook, Twitter and others. But it’s too early to tell how it will turn out.”

IPO through the back door

The ex-president is bringing his planned online platform “Truth Social” through the back door to the Nasdaq tech stock exchange – via a so-called “Special Purpose Acquisition Company”, or SPAC for short. This is an empty corporate shell that serves as a vehicle to get into the stock market quickly and easily with the capital you have collected. Prerequisite: A SPAC must merge with a suitable company for this. Investors do not know beforehand which one will end up being.

The Trump-SPAC remains a big unknown, says economic expert Dan Primack from the news platform Axios. “We don’t even know who the CEO and the other managers of this tech platform are supposed to be. We know less about this SPAC than any other,” said Primack. It is also unclear who exactly the investors are. They initially pay blindly into the SPAC shell – and can withdraw at any time.

The first donors jumped out again

When Trump announced the founding of his media platform and the merger of his SPACS with the “Digital World Acquisition Corp”, the first financiers quickly jumped out. For many, the Trump brand is more toxic than rat poison, investor Eric Gordon told the New York Times.

Large hedge funds in particular did not want to burn their fingers with it, says stock market expert Pursche. “We see the natural reaction to the Trump brand. His supporters and opponents are very divided. It is impossible to say: this is a good or a bad thing,” says Pursche. “It just reflects the feelings people have about Donald Trump. It’s not about the value of the investment.”

Trumps wants his planned network “Truth Social” to be understood as an alternative to the “tyranny” of the big technology corporations.

Image: dpa

Trump repeatedly announced his own platform

Trump’s social network should, in his words, be an alternative to the “tyranny” of the big technology corporations. Facebook, Twitter and the like had banned him for his inciting posts since the storm on the Capitol in January. Trump had then repeatedly announced his own platform.

The massive increase in the price of the Digital World share now shows the interest of investors in the plans of the ex-president, who is toying with a renewed candidacy in 2024. Still, his stock market action remains highly speculative, says investment advisor Pursche: “There is a lot of enthusiasm among his millions of followers. But from an investment point of view, something that goes up so quickly suggests that it is very dangerous. Me would advise great caution. “

And finally: The construct of the SPAC is indeed a hit in the USA. But there is already a downward trend. “We have to make it clear that SPACs are just inverted mergers in the end,” says Pursche. “And the trend, which was still hot at the beginning of the year, has now turned. In my opinion, this is something for speculators. For example, for those who prefer to invest in the Doge Coin crypto currency than to invest their money seriously and for the long term.”

SPACs are also so popular among investors because they can call up their use again if they do not like the acquisition target. Such repayments have peaked in the past few months. The reason: the merged companies failed to achieve their goals. Many stock market watchers say: This is exactly what could happen to Trump-SPAC.

Trump’s Trojan Horse: Through the back door of the stock exchange to the online platform

Antje Passenheim, ARD New York, 25.10.2021 9:19 a.m.

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