The Trump Media Group followed the microstrategy to launch a $2.5 billion Bitcoin vault plan, and the president's family played with financial instruments
By Weilin, PANews
The Trump family's abacus in the currency circle is getting louder and louder. On the evening of May 27, Trump Media & Technology Group announced that it would launch a financing plan of up to $2.5 billion for the inclusion of bitcoin in the company's treasury assets. The company has entered into subscription agreements with approximately 50 institutional investors to raise funds through the issuance of approximately US$1.5 billion of common shares and US$1 billion of zero-coupon convertible bonds, which are converted at a 35% premium.
According to official documents filed by Trump Media Tech on May 27, the financing will be used to buy bitcoin as an important part of the company's balance sheet, held alongside existing cash, cash equivalents and investment assets. At the end of the first quarter of 2024, these assets totalled $759 million.
The front foot denied media reports and the back foot made an official announcement, and the stock price fell 10.38% in a single day
"We see Bitcoin as the top tool for financial freedom, and now Trump Media is also making cryptocurrency an important part of our assets," Devin Nunes, CEO and Chairman of Trump Media, said in a press release Subscription payments, utility tokens, and other planned transactions on the Social and Truth+ platforms create synergies. "
The fundraising is expected to close around May 29. Crypto.com and Anchorage Digital will provide custody of the bitcoin vault, while Yorkville Securities and Clear Street will act as lead placement agents for the offering. Cantor Fitzgerald & Co. served as financial adviser.
Affected by the news, the company's stock price briefly rose before the market, and then turned down after the opening of the day, closing with a daily decline of 10.38%. The stock is down 31% year-to-date. The price of bitcoin briefly exceeded $110,000, and the market reacted mixed.
Notably, earlier on May 27, the Financial Times, citing six anonymous sources, said that Trump Media Technology Group plans to raise $3 billion through a stock sale to invest in Bitcoin and other cryptocurrencies. The company vehemently denied this, stating that "stupid reporters at the Financial Times listened to even dumber sources".
According to a previous report by the Financial Times, the stake is expected to be sold at the market price at the close of trading on May 23. On the day, Trump Media (DJT) shares closed at $25.72, up 4.6% on the day. As of May 23, Trump Media had a market capitalisation of $5.7 billion.
Trump Media Technology Group is a company owned by US President Donald Trump, and as of December 17, 2024, Trump holds a total of 52.9% of the shares. The company was incorporated on December 11, 2020, and its three major brands include Truth Social, Truth+, and Truth.Fi. As of Dec. 20, Trump had transferred about $4 billion worth of his stake in media companies to a trust controlled by his eldest son, Donald Trump Jr. Trump was previously the largest shareholder of Trump Media & Technology Inc., holding nearly 115 million shares, according to a filing with the Securities and Exchange Commission (SEC). After the transfer, he will no longer hold any shares directly, but will be the sole beneficiary of the trust. Donald Trump Jr. is also a member of the board of directors of Trump Media.
Following the micro-strategy, the Trump version of the "Bitcoin Vault" model was launched
Trump's move by Media Tech is widely seen as a "bitcoin reserve" strategy modelled after MicroStrategy (now renamed Strategy, Chinese MicroStrategy). The Strategy, led by Michael Saylor, has been buying Bitcoin since 2020 and raising funds through the issuance of financial instruments such as stocks, convertible bonds, and preferred shares, and increasing its position in Bitcoin has become its core strategy. As of May 26, according to Strategy's latest disclosure, the company has purchased a total of 580,250 BTC at a total cost of $40.61 billion, with an average purchase price of $69,979, approaching the $70,000 mark.
There are different interpretations of this strategy in the market. Proponents say that while there may often be concerns about the high leverage risk of this strategy, the data suggests that such concerns are not valid. Although Strategy's total debt is $8.2 billion, the debt interest rate is only 0.421%, the annual interest expense is only $34 million, and the preferred stock dividend makes the overall leverage cost extremely low. Critics argue that this model essentially relies on continuous fundraising and continuous dilution of shareholders' equity to "pile up" bitcoin positions, and will collapse if market sentiment reverses or mNAV (which represents the current share price to the value ratio of the bitcoin it owns) falls below 1.0.
Transforming into a financial services and crypto company, the president's family is playing the capital game
Last quarter, Trump Media earned just $820,000 in advertising and other sources, but lost $32 million.
This time, the funding plan of up to $2.5 billion is an important step in Trump's media technology strategy to gradually penetrate the crypto space. In April, the media company disclosed plans to explore utility tokens in a letter to shareholders. Users of the Truth Digital Wallet can use the tokens to pay for "Truth+ subscriptions" and possibly for "other products and services within the Truth Social ecosystem" in the future.
On March 24, Trump Media Technology Group announced a non-binding agreement with cryptocurrency exchange Crypto.com to collaborate on a series of exchange-traded funds and related products, which are expected to include digital assets as well as American-focused securities in different sectors such as energy, and are scheduled to be launched later this year, subject to regulatory approvals.
Back in January of this year, the Trump Media Technology Group launched a Truth.Fi with plans to venture into cryptocurrency investments. The new business is allowed to invest up to $250 million of its more than $700 million in cash reserves in traditional investment vehicles, managed accounts (SMAs), exchange-traded funds (ETFs), bitcoin, and "similar cryptocurrency or crypto-related securities."
According to the official introduction, these SMAs will be developed in partnership with Charles Schwab, which will also provide extensive advice on Truth.Fi investments and strategies. These tools and products are expected to focus on investing in U.S. growth, manufacturing, and energy companies, as well as investments that help strengthen the Patriot Economy.
The latest move by Trump Media Tech Group also echoes changes in U.S. regulatory and crypto policy. On March 6 this year, U.S. President Donald Trump signed an executive order announcing the inclusion of bitcoin in the U.S. strategic reserve. In addition, it announced the creation of the "U.S. Digital Asset Reserve", which will add five digital currencies (Bitcoin, Ethereum, Ripple, SOL, and ADA) to the government's asset reserve, and reaffirmed its commitment to ensuring that the U.S. becomes the "global crypto capital."
Overall, Trump Media is moving toward its goal of building a new "Truth Social ecosystem" that integrates media, financial services, and crypto assets through this large-scale funding and Bitcoin reserve strategy. However, whether this series of measures will give the crypto industry a positive boost or plunge it into the political vortex of Washington remains to be further verified by the market and time.