Trump Medias Bold Move: Raising $2.5 Billion for Bitcoin Acquisition

Trump Media & Technology Group (TMTG), the parent company of former U.S. President Donald Trump’s social media platform Truth Social, is set to issue common stock valued at approximately $1.5 billion and secured convertible bonds worth $1 billion on May 29.

Around 50 institutional investors, with whom agreements have already been made, will purchase the securities.

The funds raised will be directed towards establishing a Bitcoin treasury.

«We view digital gold as the pinnacle of financial freedom. […] This investment will create synergy with subscription payments, utility tokens, and other planned transactions in Truth Social and Truth+,» the announcement stated.

The offering will increase the company’s balance sheet by 4.3 times, which was $759 million at the end of the first quarter.

Cantor Fitzgerald & Co. served as the financial advisor for this transaction. Recently, Brandon Lutnick was appointed chair and CEO of the firm; he is the son of the previous head, Howard Lutnick, who was appointed U.S. Secretary of Commerce this year.

Crypto.com and Anchorage Digital will act as custodians for the coins.

On May 26, the Financial Times reported, citing knowledgeable sources, that TMTG planned to raise $3 billion through a securities issuance. Trump Media has since denied this information.

TMTG will join the ranks of companies that have adopted a Bitcoin strategy. According to BitcoinTreasuries, there are currently 114 organizations holding a total of 807,853 BTC (representing 3.85% of the total supply), with Strategy leading the way at 580,250 BTC ($63.2 billion).

A user named Lowstrife shared concerns in a thread about how such an extensive purchase of digital gold could ultimately lead to the «destruction» of the entire structure.

The specialist pointed out the increasing leverage of Strategy and organizations employing its strategy due to a continuous wave of securities offerings, which dilutes the stake of existing shareholders.

«[This method] works well when the mNAV > 1. The issue is that leverage depends on ATM to fund mandatory payments. When MSTR trades below 1 mNAV, as it did in 2022, problems arise,» Lowstrife noted.

He highlighted the management’s strategy of deferring payments on securities, which can lead to adverse side effects.

For common shares, the rise in Bitcoin prices may not compensate for the decline in returns due to new issuances. For convertible debt, refinancing or selling a portion of the coins will be necessary.

With «preferred shares,» there is an obligation to pay dividends. The issuance of these securities and the associated cash flows will be funded by the dilution of common shareholders.

«STRF represents an infinite debt with a 10% payout. Strategy will continuously tap the ATM to finance each issued dollar. Forever. Purchases made today will be paid for by future shareholders. What does that look like?» the analyst questioned.

Lowstrife stressed that the issue hinges on market conditions. He acknowledged the option to suspend dividend payments but deemed that activation unlikely, as it would be viewed as a sign of potential insolvency.

«What will this lead to? It all starts with mNAV. mNAV is everything. […] If it breaks down, the company’s ability to attract capital weakens. Conversion harms mNAV. The company loses its ability to make financial payments on its debt,» the expert forecasted.

Lowstrife pointed out the risks for Strategy with the growing number of corporations adopting Bitcoin strategies. He drew parallels with Grayscale’s GBTC, which lost its uniqueness after the introduction of an ETF, resulting in the stock premium disappearing along with demand and the «collapse» of mNAV.

The expert reiterated that mNAV is entirely sentiment-based. There are no mechanisms or reasons for the metric to correlate with asset values.

He indicated the risks of the metric dropping below 1, which would limit capital-raising opportunities and further coin purchases. This situation could be exacerbated by the need to pay dividends under unfavorable market conditions.

The complicating factor is the convertible bonds maturing between 2028 and 2032, amounting to $8.2 billion. If common stock prices do not reach the conversion level, Strategy will need to refinance the debt or repay it by selling coins.

«This isn’t a revolution. It’s a financial pyramid chasing leverage. I’m a holder. It truly saddens me to see [Michael Saylor] repeating the financial engineering tactics of 2008 that led to the rise of digital gold,» concluded Lowstrife.

For reference, Jess Myers from Moon predicted that the share of Bitcoin on the balance sheets of public organizations could reach 50% by 2045.

According to Bitwise, by the end of 2026, the holdings of the first cryptocurrency by institutional players, including governments and corporations, could reach 20% of the total supply (approximately 4.2 million BTC).

Previously, Bernstein predicted an increase in the Bitcoin reserves of companies to $330 billion by 2029.