Trump's media grift goes public
It's not a meme stock. It's a cult.
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On Friday, shareholders voted to approve the merger between Trump Media and Technology Group and Digital World Acquisition Company, making Donald Trump $3 billion richer, at least on paper.
Trump’s now one step closer to his dream of creating the one digital platform to rule them all. But who are we kidding? The goal here is to cash out quickly and use his winnings to post the $550 million bond which will allow him to protect his real estate holdings while appealing the judgment in the New York civil fraud case.
Even the Wall Street Journal is comparing the sudden surge in Trump-related shares to a meme stock. And while there are factors complicating any short-term plans Trump might have to use his windfall for legal fees or to save his assets from being seized, one thing is for certain — Trump remains in peak form as a flim-flam man.
A grift is born
In October 2021, Trump, who of course was banned from his beloved Twitter after he used it in service of inciting a coup attempt, announced that he was building “a non-cancellable global community.”
In a pitch deck that was short on specifics and long on MS-Paint-level graphics, Trump Media and Technology Group promised to create a tech stack to rival Facebook, Twitter, Netflix, CNN, and eventually Amazon and Google.
The only piece of the stack that was close to being operational was Truth Social, Trump’s low rent Twitter knockoff. But the former president flogged it to his supporters as a way to exact revenge on the social media platforms which booted him after January 6, 2021.
I created TRUTH Social and TMTG to stand up to the tyranny of Big Tech. We live in a world where the Taliban has a huge presence on Twitter, yet your favorite American President has been silenced. This is unacceptable. I am excited to send out my first TRUTH on TRUTH Social very soon. TMTG was founded with a mission to give a voice to all. I'm excited to soon beginning sharing my thoughts on TRUTH Social and to fight back against Big Tech. Everyone asks me why doesn't someone stand up to Big Tech? Well, we will soon!
The launch was more than a little rocky. It does not appear to have occurred to anyone to reserve accounts such as @donaldjtrump, which posted an image of a pig defecating on its own scrotum within moments of the site’s launch. But eventually Truth Social settled in, becoming a comfortable, MAGA echo chamber for roughly 5 million regular users for whom Elon Musk’s twitter is just too woke. This Catturd post gives you a taste of what passes for quality content over there.
Underpants gnomes
From its inception, it has never been entirely clear how TMTG planned to make money. None of the other promised lines of business materialized, and Truth Social is clogged with spammy ads for toenail fungus remover and Trump commemorative coins.
Even with the former president using the platform to communicate directly to his flock, it’s bumping along at just five million active users per month, and it lost $49 million in the first nine months of 2023. And to make matters worse, Digital World Acquisition Company (DWAC), the company created to take TMTG public, was dogged from the start by federal investigations and litigation.
DWAC is what’s known as a special purpose acquisition company, or a SPAC. It’s essentially a publicly traded shell company which exists to buy up a privately held “target” company and take it public. The advantage for the private company is that it is spared the hassle of having to open up its books to federal regulators — it just gets “bought” instead, allowing its owners to convert their interest into publicly traded shares.
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Under SEC rules, a SPAC is supposed to go public before negotiating with the target company. And indeed DWAC’s former CEO Patrick Orlando put out at least five prospectuses in 2021, saying, “We have not selected any specific business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target." And yet, as the New York Times reported, Orlando was already talking to Trump in March 2021, and was even reckless enough to snap a photo of their meeting.
The resulting SEC investigation led to Orlando’s ouster, and three men in Florida were charged with insider trading. Orlando has now sued and been sued by TMTG and DWAC. Similarly, Wes Moss and Andy Litinsky, two former cast members on The Apprentice who originally conceived of the project and pitched it to the former president, have filed suit, alleging that they were squeezed out in a bid to dilute their shares.
But most consequentially, the SEC investigation delayed the merger for upwards of a year, and with it, Trump’s planned payout.
Lock her up out
The fine print of the DWAC-TMTG merger agreement submitted to the SEC contains a lockout provision barring large shareholders from selling their shares for six months after the merger is complete. Lockouts serve to prevent early investors from dumping their shares and tanking the stock, leaving later buyers holding the bag. In this case, the lockout includes a provision forbidding the major holders to “lend, offer, pledge, hypothecate, encumber, donate, assign, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly” any of their shares during the lockout period.
That is very bad news for Trump, who owns somewhere north of 60 percent of the newly merged company and is also desperate for cash. Today is the first day the state of New York can begin collecting on the $454 million judgment in his civil fraud case, since he failed to find an insurer willing to underwrite a bond using real estate as collateral. If Trump can’t come up with the money, the attorney general will seize his properties, forcing them to be sold quickly, likely at fire sale prices.
Trump’s lawyers begged the appeals court to intercede, attesting that he and his company will face undue hardship if forced to post the bond along with the statutorily mandated nine percent interest. Meanwhile on Truth Social, Trump is cutting his attorneys off at the knees.
There is no universe in which Trump has half a billion in cash and is choosing instead to allow the state to liquidate his empire. But this intemperate shouting will make it even harder to convince the appeals court that he’ll be irreparably harmed if they don’t stay the collections. This has led many people to question if Trump will make a desperate move to leverage his paper gains from the TMTG-DWAC deal to stave off this calamity. And indeed it is technically possible under the terms of the merger agreement for the board to waive the lockout period and allow him to either sell or pledge his shares as collateral.
On the one hand, the board is stacked with Trump loyalists, including former congressman Devin Nunes, and former Trump administration officials Linda McMahon, Robert Lighthizer, and Kash Patel, alongside the ubiquitous Don, Jr. But rumors of a potential waiver and subsequent stock dump caused the share price to decline 13 percent on Friday afternoon, shaving some $457 million off of Trump’s putative holdings. Some of that loss was reversed in after-hours trading, and the stock is likely to trade higher today. But if Trump were to sell large blocks of shares all at once, he might have trouble finding someone to buy them, and he would almost certainly tank the stock even further.
So, what’s the ultimate purpose of this exercise?
As with everything Trump does, this entire thing appears to be a series of nested grifts. What’s unclear is whether this is a short term play — like the Trump NFTs and trading cards, only scaled way up — or a long term scheme — along the lines of the Trump Hotel in DC, where corporations, foreign governments, and the GOP faithful opened up their wallets to curry favor with the sitting president.
Will Trump dump his shares quickly and cash out before the whole thing goes belly up? Will he hang onto the shares in hopes that he wins the White House and can then spend four years selling high-priced ad space to the Kingdom of Saudi Arabia, coal companies, and every Republican candidate who knows what’s good for him? Will he wait until he takes office and then avoid a huge tax bill by calling the sale of his shares a forced divestiture incident to government service?
Baked into this is assumption that a guy who owns a majority of shares in a publicly traded company would get the board to alter the lockup so he can execute what is essentially a pump and dump scheme in order to pay a massive civil fraud fine and legal fees in connection with dozens of criminal charges across four indictments. Or that he would openly monetize public office by accepting emoluments. All of which is so crazy that it doesn’t even make sense in any context other than Trump.
Perhaps we can read the tea leaves in the decision to resurrect the stock ticker symbol “DJT” and bestow it on the newly merged company — although Trump had no qualms about looting the original “DJT” and leaving investors holding the bag there, so … your mileage may vary.
As of now, TMTG is deep in the red, and shows no indication that it will become profitable any time soon. None of the managers has any experience running a social media company, much less a multimedia empire. And the stock is wildly overvalued compared to the underlying asset, thanks to MAGA superfans who hope to show fealty to their hero by enriching him even more.
Untethered to reality, Trump’s supporters have actually convinced themselves that the company is going to buy up TikTok, a company with close to $100 billion in annual revenue. But the meme stock analogy fails to adequately convey what’s going on here.
The keyboard warriors bidding up Gamestop and AMC weren’t doing it out of devotion to the companies themselves — they were trying to make some cash and stick it to the hedge funds villains who short sell and loot American corporations into bankruptcy. In contrast, the MAGA faithful see themselves as allied with the billionaire who stands to profit the most from the stock’s rise.
That’s not a meme. It’s a cult.
That’s it for today
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We’ll be back with more Wednesday. Until then, have a good one.
Trump's Good News: his share of Truth Social could be worth approx 3.6 Billion dollars.
Trump's Bad News: by the time he can sell any, it will probably be worth approx 464 Million dollars.
Excellent, informative article. But it underscores how well and easily Trump’s grifts continue to work for him. Maybe not easily in layman’s terms. Just the fact that few other people - immoral, amoral, should-be-in-jail lawbreakers - can continue an open con, abetted by millions of cult members, including high-placed judges and the like.