Trump IPOs His Presidency
Photograph Source: Kanesue – CC BY 2.0
Why does anyone think Donald Trump is actually running for president? Granted, he’s the Republican nominee and is on the ballot in all fifty states, but the only election day that interests Trump is the one around September 20. On that day (or perhaps a few days later) the lockout period on his Trump Media shares (for which he paid nothing) expires and he will be free to dump his gifted 57.6% stake (114,750,000 shares) on scheming billionaires (for example, the Saudis, Vladimir Putin, a Mexican drug cartel, etc.) who might have an interest in the first $2.4 billion IPO (initial public offering) of a prospective American presidency.
Trump isn’t so much a candidate these days as a walking conflict-of-interest whose bumper stickers might well read: “Trump-Vance 2024: On Sale September 20.”
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As stated on the Trump Media website, the business purpose of Truth Social (the main operating—if that’s the word—subsidiary of Trump Media) is “to end Big Tech’s assault on free speech by opening up the Internet and giving the American people their voices back.” A more accurate mission statement might read:
Truth Social and its parent company, Trump Media, are special purpose corporations set up to enrich Donald J. Trump at the expense of his gullible supporters and to provide the Republican standard bearer a legal vehicle to accept bribes from the likes of Vladimir Putin.
Trump’s run for the presidency is a smoke screen to gin up enough campaign noise to suggest that Truth Social is worth its $4 billion market capitalization. (Actually, it’s pretty much worth nothing, save for the cash on its balance sheet.)
What matters to Trump isn’t getting elected president so much as dumping his shares for $2.4 billon after September 20, when the lockout period expires.
But don’t hold your breath that Trump will soon post such a statement on its website or Form 10-K.
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In case your end-of-summer vacation hasn’t included digging deep into Trump Media’s Securities and Exchange Commission (SEC) filings, here are some of the highlights from the company’s 2024 second-quarter results, which show the extent to which the house that Trump built remains little more than a textbook exercise in deceptive market practices and share price manipulation.
As of June 30, 2024, Trump Media (its Nasdaq ticket symbol is the vainglorious DJT) reported revenue of $800,000 and a loss on operations of $18.6 million. For the first half of the financial year, the company reported earnings of $1.4 million and an operating loss of $117 million.
(Note: in the history of Wall Street, few companies with a $4 billion market capitalization have ever posted quarterly revenue of $800,000, and that the SEC even allows it to be listed and publicly traded, with convict Trump himself owning a majority of the outstanding shares, is shameful.)
But even the $18.6 million loss on operations is the good news: after adding in a “change in fair value of derivative liabilities,” Trump Media reported a loss of $344 million in the first six months of 2024.
Such a woeful performance, however, did not prevent the company from giving its former chairman and founder, Donald Trump, 36,000,000 in “earnout shares,” and from paying out to some of the worst executives on Wall Street $54.4 million in “stock-based compensation”.
In other words, at its Sarasota, Florida, offices Trump Media might have stationery, a receptionist, visiting investment bankers, a coffee machine, accountants, and company parking places; it just doesn’t have any paying customers.
But its business model is to bleed public money into Donald Trump’s pocket, just as he has managed to turn campaign finance donations into vouchers to pay off his lawyers and criminal victims.
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Defenders of the social media company (although that may not include anyone who bought the stock at about $70 a share when it’s now trading at $21) might well point to the $344 million in cash that Trump Media reports on its balance sheet.
Or the fact that in the second quarter, the company established a standby equity purchase agreement that would allow it to dump another 37,969,380 shares on a willing buyer, a Cayman Island limited company backed by Yorkville.
That deal was announced as being worth $2.5 billion in potential equity capital for Trump Media, but since then the prices of the shares have collapsed, making the block now worth, potentially, only about $800 million. And to arrange the standby line of credit, Trump Media paid out some $10-15 million in commitment fees. (To paraphrase Poor Richard’s Almanack: “A fool and his money are soon partying.”)
In theory, even if the burn rate on Trump Media’s cash is $40 million a year, the company ought to be able to limp along until Trump is elected president, after which he can direct all government communications to be conducted on Truth Social, perhaps making its current market valuation ($4.14 billion) look like a bargain.
But if Trump loses the election (which is looking increasingly likely), investors in Trump Media will be hard-pressed to explain why a company with no revenue ($3.2 million a year is about the average annual take of a McDonald’s franchise), no customers (other than a few Trump online groupies living in their grandmothers’ basements), no business plan (“to end Big Tech’s assault on free speech by opening up the Internet and giving the American people their voices back” doesn’t count), and terrible management is worth anything more than its liquidation value.
To be generous, I would put that figure today at $1.80 a share by dividing the cash on hand by the outstanding common shares, although that generously overlooks the ongoing quarterly losses, convertible promissory notes, and outstanding warrants, all of which will dilute the stock.
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In theory, Trump Media can deploy some of the cash on its balance sheet into profitable investments that could revive the fortunes of the struggling social media company. But best as I can determine, the company’s senior managers—the likes of former congressman Devin Nunes and first son Donald Trump Jr—are little more than Trump errand boys whose only corporate goal is to keep the company alive until former President Donald J. Trump has cashed out.
During the second quarter of 2024, Trump Media made several moves, none of which had little to do with building up a functioning social media corporation.
In addition to the Yorkville standby equity purchase agreement, Trump Media agreed to a cash and stock deal (5.1 million shares; valued at about $35 million) with Perception TV (offices in London and Slovenia) to boost its content delivery network (CDN).
The problem with this deal to gain access to the online streaming market is that it was structured mostly to reward a Trump bundler/insider in Louisiana who figured out how get between Trump Media and its $35 million payout.
What could go wrong if the structure underpinning your CDN reads like this in the prospectus:
In connection with the roll out of the Trump Media & Technology Group Corp. (the “Company” or “TMTG”) content delivery network (“CDN”) technology, on July 3, 2024, the Company, WorldConnect Technologies, L.L.C. (“WCT”), WorldConnect IPTV Solutions, LLC (“Solutions”) and JedTec, L.L.C. (“JedTec”) entered into an asset acquisition agreement (the “Asset Acquisition Agreement”), pursuant to which the Company agreed to acquire substantially all of the assets of WCT or its affiliate, which mainly included certain agreements, including an option agreement (the “Option Agreement”), dated February 5, 2024, by and between WCT, Perception Group, Inc., Perception TVCDN Ltd., and FORA, Forum Računalništva, d.o.o., as amended and restated (each of the parties thereto other than WCT, collectively, “Perception”), as well as ancillary agreements related to the source code purchase (the “Source Code Purchase Agreement”) and support and maintenance (the “Support and Maintenance Agreement”, together with the Source Code Purchase Agreement, the “CDN Agreements”).
WorldConnect Technologies is a shell company in the bayous of Louisiana with neither a website nor, as best as can be determined, more than a few employees (if it has any).
Drunken sailors might find better investments for $35 million in cash and stock.
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Another second-quarter Trump Media development is that the SEC criminally charged Patrick Orlando (the godfather who brought $300 million in SPAC cash to Trump Media and then let Trump keep most of the shares) with having violated securities laws when he approached Trump Media about a merger before having raised the funding (as is required by securities law).
The indictment reads:
This case involves fraudulent conduct and materially false and misleading statements and omissions made by Patrick Orlando (“Orlando”), in his capacity as the Chief Executive Officer (“CEO”) and Chairman of Digital World Acquisition Corp. (“DWAC”), in filings made with the Commission. Through these publicly available filings, Orlando falsely represented that DWAC, a special purpose acquisition company (“SPAC”) that he controlled, did not intend to merge with any specific company and, indeed, had had no discussions or contacts with any potential merger targets. Orlando knew these statements were false because he had personally engaged in numerous lengthy discussions with representatives of Trump Media & Technology Group Corp. (“TMTG”), a social media, and because he had targeted TMTG for merger with DWAC for months.
If Trump is ever arraigned on similar charges, I am sure he would deny any knowledge of approaches made by Orlando to Trump Media (in those days little more than Trump and his smart phone), although it will be harder for him to deny the gift that he received at the same time from Orlando, as it is described in the SEC indictment:
On June 7, 2021, Orlando exchanged messages with representatives of Investment Bank. Orlando wrote, “Let’s make DWAC great. I gave [T]rump a [SPAC A] tombstone. I will [g]ive him a DWAC ONE THE SIZE OF A GOLF CART!!” In the financial industry, a “tombstone” is a notice that is used to formally announce a transaction, such as an IPO. At the LOI signing event on June 4, 2021, Orlando gave TMTG representatives a commemorative plaque tombstone related to SPAC A’s IPO.
Orlando served as the chairman of Digital World (the cash cow) until 2023, when he was fired for not concluding the merger soon enough with Trump Media, although after he had raised $8 million in seed capital for the Trump company from dubious sources, including from an off-shore Russian bank in the Caribbean that had revenue from the porn industry. In addition to his SEC charges, Orlando himself is suing Trump Media for unjust termination (file under “thieves fall out”).
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Come September 20, 2024, Trump Media will become the first instance in American politics when a presidential candidate will be offered for sale on a public exchange (in this case Nasdaq).
Trump does have this problem when it comes to selling his shares and then call options on his soul: as a company insider, the moment he announces his intention to “divest” some of his shares, the DJT share price will collapse to something approaching its net book value of about $1-2 a share.
Without Trump, the company is nearly worthless, as it has few other assets (assuming that the Financial Accounting Standards Board would allow someone with 34 felony convictions, a raft of sexual assault lawsuits, pending federal and state indictments, and a half billion dollars due in court fines to be classified as an “asset”).
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What makes more sense for Trump—given that $2-3 billion is chump change for those who might like to own him, such as the Saudis or Putin—is for him to sell his DJT block in an off-market, dark pool transaction, in which the buyer and seller would agree a price for the shares after the exchange has closed.
Such a block sale would get around an announcement of Trump’s intention to dump his shares, which will collapse the share price (already in free fall at $21 from a high of $76 around the time of the merger listing in March 2024).
At the moment, the average daily volume of Trump Media is about 5-6 million shares a day (the entire float of the stock is about 191,477,375 shares), but I would guess two additional elements are clouding an accurate picture.
One is the number of short sellers (those betting that the price of the stock will collapse), and the second is Trump insiders, who are doing everything they can for the Don of dons to inflate the share price until September 20, when he is free to dump them on the market or to anyone.
In the spring, when shares of DJT were also in free fall, the company chairman, former member of Congress and Trump sycophant Devin Nunes tried to bully the shorts by complaining to the SEC and Congress that many investors were “naked shorts” of Trump Media—meaning, they were selling short the shares without actually having borrowed the same amount in the market.
Short covering might well explain much of the DJT daily volume, and the shorts will be valuing the company at close to zero.
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Earlier this year Nunes told Fox Business that Trump Media had “about 600,000 retail investors. He added: “[W]e don’t have any institutions, zero Wall Street money.”
It’s a quaint image of citizen shareholders rallying with broken piggy banks to invest $25 or $50 in Trump Media shares, with the diversified shareholding in the company representing some pre-election groundswell of support for the former president, criminally convicted Trump.
But it’s a complete fiction, given that about 60% of the float in the company shares is controlled by Trump personally and that the balance is largely held by early round investors who only went into the venture to own a stake in a presidential candidate.
As best I can tell, the only “retail investor” on the company’s share registry is Congresswoman Majorie Taylor Greene, who (perhaps engaging in a little inside trading over dinner at Mar-a-Lago?) bought into Digital World in 2021, more proof that Trump himself was in early on the Orlando SPAC magic.
According to one report of the trade, based on a range submitted on congressional filings, Taylor Greene “could have bought between 159.23 and 530.79 shares. The purchase would now be worth $3,437.78 to $11,459.76 and down 77.1%.”
Hey, Marge, how do you make a small fortune on Wall Street? Listen to your pal Trump and start with a large one.
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My own feeling about Trump Media chairman and president Devin Nunes is that he’s a hood ornament for some of Trump’s Maybach insider crowd, who at the former president’s direction are running the boiler room, bucket shop operation (to pump up the price of the stock and then to dump it on chumps, before the price collapses).
I am sure the that figurehead Nunes reports to his fellow board member, Don Jr., who more than anyone will know that the other Trump Organization companies are bankrupt and that the last game in town is to find a sucker or suckers for his father’s 114,750,000 stake.
Perhaps in exchange for turning a blind eye to such a sting, Nunes and some associates were recently allowed to bill the public company some $3 million to settle claims from the IRS that the Trump Media executives had failed to pay taxes on certain bonus shares paid out around the time of the great merger accounting sleight of hand in March 2024.
Buried in an SEC filing dated August 23, the company reported:
Effective August 22, 2024, the Board and the audit committee of Trump Media & Technology Group Corp. (the “Company” or “TMTG”) authorized a share repurchase of an aggregate of 128,138 shares of the Company’s common stock from certain executive employees at a prevailing market price of $22.70 per share. As consideration for the repurchase, the Company will remit $2,908,708, plus applicable penalties and interest, to the U.S. Internal Revenue Service and certain state taxing authorities in connection with the March 7, 2024 issuance of the TMTG Executive Promissory Notes.
My guess is that the IRS wanted to go after the executives based on a higher market stock price valuation from last March, and that this share buyback allowed Nunes and his colleagues to escape paying penalties and a fine, and instead let his employer, Trump Media, settle the claim with the IRS.
Next time the IRS sends you a you-owe-us letter, ask your boss to pay it off.
Matthew Stevenson is the author of many books, including Reading the Rails, Appalachia Spring, andThe Revolution as a Dinner Party, about China throughout its turbulent twentieth century. His most recent books are Biking with Bismarck and Our Man in Iran. Out now: Donald Trump’s Circus Maximus and Joe Biden’s Excellent Adventure, about the 2016 and 2020 elections.
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