Former President Donald J. Trump’s social media company is currently worth over $6 billion. But the agreement that set the stage for its stock market debut in March was nearly derailed years earlier by Mr. Trump, who is now the biggest beneficiary of its richly valued stock, one of the firm’s co-founders said on Wednesday.
Andy Litinsky, who helped start Trump Media & Technology Group, the parent company of Truth Social, testified in federal court that he had doubts about whether Mr. Trump would agree to take the firm public by merging it with a cash-rich shell company, even as the deal-signing ceremony was set to take place at the former president’s Mar-a-Lago residence in late 2021.
Mr. Litinsky, a former contestant on Mr. Trump’s reality television show “The Apprentice,” said that before the ceremony, Mr. Trump had asked him whether he should go ahead with the merger of Trump Media and the shell company, Digital World Acquisition Corporation.
Mr. Litinsky was in court in Manhattan testifying as a witness in an insider trading trial that arose from an investigation of traders who made millions of dollars with well-timed purchases of Digital World’s stock before the merger announcement on Oct. 20, 2021.
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Mr. Litinsky testified that after his conversation with Mr. Trump on that day in October 2021, he was left uncertain about whether the former president would sign the merger agreement. But Mr. Litinsky added that it was hard for him to know the thoughts “in former President Trump’s brain.”
Trump’s Social Media Company, Explained
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A high-flying debut. Trump Media & Technology Group, the owner of former President Donald Trump’s social media platform, attracted a frenzy of interest on its first day of trading, though the fervor appears to have subsided. Here’s what to know about the company:
Trump Media’s origins. In early 2021, a plan was hatched to create a conservative media giant centered on Trump after Twitter banned him in the wake of the Jan. 6 attack on the U.S. Capitol. In 2022, the company introduced Truth Social, which Trump has used as his primary bullhorn to reach supporters and attack critics.
Going public. The goal all along was to take Trump Media public through a merger with a special purpose acquisition company, or SPAC. After a rocky start that included an investigation by the S.E.C., Trump Media merged with a shell company, Digital World Acquisition Corporation, and started trading on March 26.
A tech minnow. Truth Social is relatively small in the social media universe. Since the digital platform’s introduction in 2022, its app has been downloaded 10 million times. By comparison, Meta’s Threads had 171 million downloads between its July debut and November.
The biggest beneficiaries. The company’s largest shareholder is Trump himself, and no other shareholder comes close. But many people and companies are poised for a windfall, including Devin Nunes, the former Republican congressman who became chief executive of Trump Media in 2022.
A financial lifeline? It may not be easy for Trump to use his gains to help with his legal problems because of restrictions that prevent major shareholders from selling shares for at least six months, or using them as collateral for loans. But because Trump controls so much of the company, the board could waive those restrictions on his request.
Earlier in his testimony, Mr. Litinsky described Mr. Trump as “the ultimate decision maker.”
Whatever last-minute doubts Mr. Trump may have harbored, he signed the merger agreement. After a lengthy delay, the deal was completed on March 25, and Trump Media became a publicly traded company flush with nearly $300 million in cash and a red-hot stock. For his involvement in the company, Mr. Trump was awarded a roughly 65 percent stake.
Shares of Trump Media have soared, making the stake worth billions.
At present, Mr. Trump’s 115 million shares in Trump Media are worth about $5.4 billion on paper, an opportune windfall given that he is on the hook for hundreds of millions of dollars of legal bills tied to the multiple cases against him. But Mr. Trump cannot sell his shares or use them as collateral until at least mid-September, according to rules included in the merger agreement.
Mr. Litinsky made his comments about Mr. Trump’s “hesitation” over the deal during cross-examination by a lawyer for Bruce Garelick, a former Digital World board member who was charged with tipping off his former boss and his boss’s brother about the merger announcement.
The brothers, Michael Shvartsman and Gerald Shvartsman, made about $23 million in illegal trading profits. They pleaded guilty last month and avoided going to trial along with Mr. Garelick.
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Mr. Garelick, who worked for Michael Shvartsman at a small venture capital firm in Miami, made just under $50,000 in illegal trading profits, the authorities have charged.
In an opening statement, Jonathan Bach, a lawyer for Mr. Garelick, told the jury that his client had done nothing wrong and suggested that the Shvartsman brothers could have gotten the illegal tip about the merger negotiations from another person. Mr. Bach said his client was “honest and ethical.”
On direct questioning by a federal prosecutor, Mr. Litinsky said he had known not to discuss details of the merger talks with anyone because “it would be against the rules to do so.” He said company lawyers had come up with a code name for the deal — Project USA — to help maintain a level of secrecy.
Mr. Litinsky said he had never met Mr. Garelick and was testifying at the trial because of a government subpoena.
Mr. Garelick’s trial coincides with Mr. Trump’s first criminal trial, which is taking place in a courthouse just up the street. Mr. Trump is charged with taking part in a scheme to conceal hush-money payments to the porn star Stormy Daniels in the final days of the 2016 presidential campaign to suppress her story of a sexual liaison that she said she had with Mr. Trump.
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Mr. Litinsky, after being “fired” by Mr. Trump on “The Apprentice,” later worked for several years as the head of Mr. Trump’s television production company. Shortly after Mr. Trump left the White House in 2021, Mr. Litinsky and Wes Moss, another former contestant on “The Apprentice,” approached Mr. Trump with the idea of founding his own social media company.
Mr. Litinsky and Mr. Moss are currently suing Trump Media and Mr. Trump, claiming that the company is wrongfully trying to deprive them of their full stake in the company, which is now worth more than $500 million.
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