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The Trump family's calculations in the cryptocurrency space are getting louder. On the evening of May 27, Trump Media Technology Group announced a financing plan of up to $2.5 billion to integrate Bitcoin into the company's treasury assets. The company has reached subscription agreements with about 50 institutional investors, planning to raise funds through the issuance of approximately $1.5 billion in common stock and $1 billion in zero-coupon convertible bonds, with the conversion price equivalent to a 35% premium.
According to the official document submitted by Trump Media Technology on May 27, this financing will be used to purchase Bitcoin as an important component of the company's balance sheet, held alongside existing cash, cash equivalents, and investment assets. As of the end of the first quarter of 2024, these assets totaled $759 million.
Denies media reports only to announce afterward, stock price falls 10.38% in one day.
"We view Bitcoin as the premier tool for financial freedom, and now Trump Media Company is also considering cryptocurrency as an important component of our assets," said Devin Nunes, CEO and Chairman of Trump Media, in a press release. "This is the 'crown jewel' asset we are acquiring for the first time, and this investment will help the company resist harassment and discrimination from financial institutions—issues faced by many Americans and American businesses—while also creating synergies for subscription payments, utility tokens, and other planned transactions on the Truth Social and Truth+ platforms."
This fundraising is expected to be completed around May 29. Crypto.com and Anchorage Digital will provide custodial services for this Bitcoin treasury, while Yorkville Securities and Clear Street will act as the lead placement agents for this issuance. Cantor Fitzgerald & Co. will serve as the financial advisor.
Affected by the news, the company's stock price briefly rose in pre-market trading, then turned down after the market opened, closing with a drop of 10.38% for the day. The stock has fallen 31% this year. Bitcoin's price once exceeded $110,000, with mixed market reactions.
Notably, earlier on May 27, the Financial Times cited six anonymous sources, stating that Trump Media Technology Group plans to raise $3 billion through stock sales for investments in Bitcoin and other cryptocurrencies. The company strongly denied this, stating that "the foolish reporters of the Financial Times listened to even more foolish sources."
According to a previous report by the Financial Times, the equity is expected to be sold at the market price as of the close on May 23. On that day, the stock price of Trump Media (DJT) closed at $25.72, rising 4.6% for the day. As of May 23, the market capitalization of Trump Media was $5.7 billion.
Trump Media Technology Group is a company under U.S. President Trump, holding 52.9% of the shares as of December 17, 2024. The company was registered on December 11, 2020, and includes three major brands: Truth Social, Truth+, and Truth.Fi. As of December 20, Trump had transferred approximately $4 billion worth of shares from his media company into a trust controlled by his eldest son, Donald Trump Jr.
According to a filing submitted to the U.S. Securities and Exchange Commission (SEC), Trump was previously the largest shareholder of Trump Media and Technology Group, holding nearly 115 million shares. After the transfer, he will no longer directly hold any shares but will become the sole beneficiary of the trust. Donald Trump Jr. is also a board member of Trump Media.
Imitating MicroStrategy, Trump’s version of the 'Bitcoin Treasury' model goes live.
This move by Trump Media Technology is widely seen as emulating the 'Bitcoin Reserve' strategy of MicroStrategy (now renamed Strategy). Led by Michael Saylor, Strategy has continued to purchase Bitcoin since 2020, raising funds through financial instruments such as stock issuance, convertible bonds, and preferred shares, making Bitcoin a core part of its strategy. As of May 26, according to the latest disclosures from Strategy, the company has accumulated 580,250 BTC, with a total cost of $40.61 billion and an average purchase price of $69,979, approaching the $70,000 mark.
There are different interpretations of this strategy in the market. Supporters argue that despite concerns about the high leverage risks of this strategy, data shows that such concerns are unfounded.
Although Strategy's total debt is $8.2 billion, the debt interest rate is only 0.421%, with annual interest expenses of only $34 million, plus preferred stock dividends, resulting in an overall low leverage cost. Critics argue that this model essentially relies on continuous financing and ongoing dilution of shareholder equity to 'pile up' Bitcoin positions. Once market sentiment reverses or mNAV (representing the current stock price to the value of its held Bitcoin) falls below 1.0, it will collapse.
Transitioning to financial services and cryptocurrency, the presidential family plays capital games.
In the last quarter, Trump Media's revenue from advertising and other sources was only $820,000, while it lost $32 million.
This time, the financing plan of up to $2.5 billion is an important step for Trump Media Technology to gradually deepen its strategy in the cryptocurrency field. In April, the media company disclosed plans to explore utility tokens in a letter to shareholders. Users of the 'Truth Digital Wallet' may use this token to pay 'Truth+ subscription fees' and may also be used for payments 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 jointly launch a series of exchange-traded funds and related products. These ETFs are expected to include digital assets as well as securities focused on U.S. manufacturing, covering various industries such as energy, and are planned to be launched later this year, pending regulatory approval.
As early as January this year, Trump Media Technology Group launched Truth.Fi, planning to enter the cryptocurrency investment space. The new business has been approved to invest up to $250 million of its over $700 million cash reserves into traditional investment tools, separately managed accounts (SMA), exchange-traded funds (ETF), Bitcoin, and 'similar cryptocurrencies or cryptocurrency-related securities.'
According to official information, these SMAs will be developed in collaboration with Charles Schwab, which will also provide extensive advice on investments and strategies for Truth.Fi. These tools and products are expected to focus on investments in growth-oriented, manufacturing, and energy companies in the U.S., as well as investments that help strengthen the Patriot Economy.
The latest actions of Trump Media Technology Group also echo the changes in U.S. regulation and cryptocurrency policy. On March 6 of this year, President Trump signed an executive order declaring Bitcoin to be included in the U.S. strategic reserves. Additionally, it announced the establishment of a 'U.S. Digital Asset Reserve,' incorporating five digital currencies (Bitcoin, Ethereum, Ripple, SOL, and ADA) into government asset reserves, reaffirming the commitment to ensure that the U.S. becomes the 'global cryptocurrency capital.'
Overall, Trump Media is moving towards its goal of building a new 'Truth Social ecosystem' that integrates media, financial services, and crypto assets through this large-scale financing and Bitcoin reserve strategy. However, whether this series of initiatives will provide a positive boost to the cryptocurrency industry or plunge it deeper into the political whirlpool of Washington remains to be further validated by the market and time.
This article is co-published from: PANews.
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