Trump Media and Technology Group on Tuesday said it's struck a deal to raise $2.5 billion that will be tapped to buy bitcoin, creating a reserve of the cryptocurrency.
The company's move into cryptocurrency comes after Trump Media has ventured into other investment arenas, including starting exchange-traded funds, or ETFs, and separately managed accounts with investment strategies the company says are "rooted in American values and priorities."
In its Tuesday announcement, Trump Media said it has an agreement with about 50 institutional investors to buy $1.5 billion of the company's stock, along with another $1 billion in debt that can be converted into stock at a later date. The $2.5 billion in funds will be used to create a "bitcoin treasury," which the company said will be added to its balance sheet.
This would be in addition to cash, cash equivalents and short-term investments that Trump Media already holds, which it said were worth $759 million.
President Trump, the largest investor in Trump Media, has increasingly focused on cryptocurrencies, both through his private business and his administration. He has directed his officials to create a national "crypto strategic reserve" that will include bitcoin, ethereum and lesser-known cryptocurrencies. The goal for Trump Media — best known for its Truth Social app — is to push the company into becoming more than a tech business, according to CEO Devin Nunes.
"It's a big step forward in the company's plans to evolve into a holding company by acquiring additional profit-generating, crown jewel assets consistent with America First principles," Nunes said in the Tuesday statement.
Shares of Trump Media tumbled $2.14, or 8.3% to $23.58 in early afternoon trading. Because the deal is based on issuing $1.5 billion worth of new shares of the company, as well $1 billion in convertible debt, the offer could dilute the value of existing shareholders' stock, including Mr. Trump's.
What's happening with Truth Social?
Trump Media's push into money management and cryptocurrencies comes as Truth Social continues to lose money.
In the first quarter, Truth Social lost $31.2 million, while its revenue rose 7% to $821.2 million. In a May 9 regulatory filing, Trump Media said its Truth Social has "generated limited advertising revenue" to date, while it expects to "incur significant expenses and operating losses for the foreseeable future" as it builds its streaming business.
Social media businesses typically rely on advertising as a core source of revenue, with companies targeting their ads to specific demographics, such as app users who are, say, young parents or retirees.
Truth Social doesn't release data about the size of its user base, but rival social media apps have typically recorded much higher sales growth, such as Reddit, which said its fourth-quarter ad sales jumped 60% to $394.5 million from a year earlier.
Why is Trump Media venturing into financial services?
Trump Media describes its new division, called Truth.Fi, as mixing financial services and financial technology.
"By expanding into this realm, we aim to serve millions of investors in America and around the world who believe in the greatness of the American economy and want to invest in superior companies while avoiding the giant, woke investment funds and politically motivated debanking problems," the company's May 9 regulatory filing said.
"Debanking" is the term used by some conservative figures who have accused banks of barring them from opening accounts or blocking access to their assets because of their political views, prompting a Senate hearing in February over the issue. It's also been the focus of some crypto investors, such as Nathan McCauley, who testified in the Senate hearing that his bank had closed his company's account on short notice because they weren't comfortable with crypto transactions.
Trump Media's crypto investment "will help defend our Company against harassment and discrimination by financial institutions, which plague many Americans and U.S. firms, and will create synergies for subscription payments, a utility token and other planned transactions across Truth Social and Truth+," Nunes said in the statement.
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