Trump is about to get permission to cash in on media stocks

(Bloomberg) — Donald Trump is a month away from turning his paper social media fortune into cold, hard cash. The question is, will he?

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The former president will be able to start selling off bits and pieces of his $2.6 billion holding in Trump Media & Technology Group Corp. (DJTWW, DJT), whose stock price has fluctuated wildly since going public through a special-purpose buyout merger in March. .

Trump has indicated no intention to sell shares in Trump Media, which operates his social media platform Truth Social. And in doing so, it could give the impression that Trump is prioritizing personal profits — a criticism often leveled by pundits — and alienate loyalists who poured money into the company’s stock as his presidential campaign grew early on. this year.

However, the Republican nominee also faces massive legal bills that a sale could help.

“It’s complex,” said Michael Ohlrogge, an associate professor at New York University Law School who has researched SPACs. Trump should balance potential profits with any longer-term goals, such as returning to the White House, he said.

Trump Media representatives did not respond to requests for comment. They previously said reporting on Donald Trump’s path to cashing in on the firm would be “completely baseless” and partisan, “with no imaginable sign anywhere that he intends to do so.”

Trump, who owns about 60 percent of Trump Media, is expected to be able to start selling shares as soon as Sept. 20, when a lock-up period that prevents insiders from selling shares is lifted. So are his co-founders Andy Litinsky and Wes Moss, both former contestants on The Apprentice, as well as Patrick Orlando, whose fund, ARC Global Investments II LLC, sponsored the SPAC that merged with Trump Media.

Since the deal closed on March 25, the company’s stock has fluctuated wildly, trading as high as $79.38 and as low as $22.18. They closed Monday at a new low of $22.24, giving Trump Media a market cap of $4.3 billion.

Trump’s sale of a large number of shares could “be seen as sending a signal about his lack of confidence in the company,” Ohlrogge said. “That could look bad in itself, and a drop in the share price could look bad for him as well.”

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The volatility appears to have little to do with the underlying business, which is losing money, as third-party trackers show stagnant user metrics. The company lost $344 million in the first six months of the year, mostly due to paper losses on derivatives, and took in just $1.6 million in sales.

Instead, Trump Media has become a way for investors to bet on Trump’s potential return to the White House. Its strong swings were largely driven by retail frenzies fueled by WallStreetBets and Reddit’s StockTwits — which can evaporate as quickly as they start.

The stock’s latest slide coincided with a drop in the implied probability that Trump will win in November, according to PredictIt. The betting market shows his odds have fallen to 46 percent from 69 percent last month as Vice President Kamala Harris, the new Democratic presidential nominee, has gathered support. The Democratic National Convention is underway in Chicago this week, with officials and celebrities rallying around it.

Whatever the reason for Trump Media’s valuation, the stock sale would help its namesake founder pay for mounting legal bills.

Trump is on the hook for more than half a billion dollars in penalties after losing a pair of lawsuits earlier this year, both of which he appealed. He also faces an ongoing criminal prosecution for his attempt to overturn the result of the 2020 presidential election, which he lost to Joe Biden.

The blackout is likely to end just days after Trump’s sentencing in his criminal trial, set for September 18 in Manhattan. Trump faces up to four years behind bars for falsifying business records to hide a payment to a porn star before the 2016 election to keep her quiet about an alleged affair.

The exact day the former president and other insiders will be able to sell it depends on the stock price. If the stock remains at or above $12 for any 20 trading days beginning August 22, then the earliest trading day for insiders to sell shares will begin as soon as September 20. shares until September 26, regardless of how they trade.

“If they come in and start selling, the stock price will take a hammering,” said Tuttle Capital Management chief executive Matthew Tuttle. “It will depend on whether he needs the money.”

— With assistance from Erik Larson, Jef Feeley, Hadriana Lowenkron and Matt Turner.

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