Trump Media and Technology Group (TMTG) – operator of the social media platform Truth Social, the streaming platform Truth+, and the FinTech brand Truth.Fi – has announced the raising of USD 2.5 billion in debt capital to establish a “Bitcoin treasury.”
Trump Media has signed subscription agreements with approximately 50 institutional investors. As part of a private placement, the company will issue USD 1.5 billion in common stock and USD 1.0 billion in senior secured convertible notes with a 0.00% interest rate. Trump Media plans to use the gross proceeds of USD 2.5 billion to accumulate Bitcoin, according to a press release available here. With this move, the company follows in the footsteps of US software firm Strategy (formerly MicroStrategy).
Subscribe to our newsletter
The best articles of the week, directly delivered into your mailbox.
Risk-free leverage on Bitcoin?
Before venturing into Bitcoin, Strategy was primarily a business intelligence and analytics software company offering tools for data-driven decision-making and enterprise reporting. Since 2020, however, Strategy has been aggressively raising debt to acquire Bitcoin. The company has transformed into a quasi-Bitcoin hedge fund and now holds USD 63 billion in the cryptocurrency – over 2.5% of the total supply. With this bold strategy, Michael Saylor’s company propelled its valuation into the top 100 US stocks.
Strategy typically raised capital through a combination of equity issuance and convertible notes. Interest and potential repayments on the approximately USD 10 billion will not be due until 2027. Mathematically, the price of Bitcoin would have to fall below USD 20,000 by then to put Strategy under liquidity pressure. While the risk of the strategy is low, it is not nonexistent. Saylor plans to expand his Bitcoin fund by an additional USD 42 billion. Depending on how future debt instruments are structured, the risk level could increase. If Strategy ever has to sell Bitcoin to service interest or debt, a devastating downward spiral could ensue – particularly if Bitcoin’s price and thus Strategy’s share price collapse at an inopportune time, hindering further capital raises.
The digital gold rush
For now, however, the “Strategy strategy” remains very attractive with relatively low risk. This has encouraged early imitators to pursue similar structuring. One such project, 21 Capital, is backed by the heavyweights Cantor Fitzgerald, Tether, and SoftBank. The project, nicknamed “Twenty One,” currently manages USD 3 billion in Bitcoin and aims to expand its holdings through debt financing. Trump Media appears eager to join this digital gold rush and is employing the same approach.
“We view Bitcoin as a premier instrument of financial freedom, and now Trump Media will hold cryptocurrencies as a core part of our assets. This investment is our first acquisition of a crown-jewel asset and will help protect our company from harassment and discrimination by financial institutions [...].” – Devin Nunes, CEO and Chairman of Trump Media and Technology Group
Yorkville Securities and Clear Street acted as co-lead placement agents, with BTIG and Cohen & Company Capital Markets serving as co-placement agents. Cantor Fitzgerald & Co. – whose founder served as Trump’s Secretary of Commerce – acted as financial advisor. Crypto.com and Anchorage Digital will custody Trump Media’s Bitcoin reserves.
