Things have gone very badly for shareholders of Trump Media & Technology Group Corp., the parent company of former President Donald Trump’s social media company, Truth Social. Its stock has fallen about 45% in just the past two weeks.
But despite the recent bad news for the company’s public shareholders—yesterday’s 15% rise notwithstanding—the company’s dominant shareholder, Trump himself, is virtually certain to get handed a big reward after the stock market closes on Friday.
That’s because barring a two-day evisceration of Trump Media’s stock price, which closed at $26.40 a share on Wednesday, the company will almost certainly hand Trump another 36 million shares, worth $950 million at Wednesday’s closing price.
How is it that public holders of the stock, whose trading symbol is Trump’s initials, DJT, have been getting whacked while Trump is about to be rewarded? It’s all been disclosed in Trump Media’s securities filing—in 84 pages of risk factors—which I suspect many retail shareholders of DJT have never read and might even consider “fake news” if they did read it somewhere, like on FastCompany.com. (Which is why I call Trump Media “a belief stock” rather than an investment.)
Here’s the deal on Trump’s imminent windfall:
On Friday, DJT will complete 20 days of public trading. Under the terms of Trump’s so-called earnout provision with the company, he’s entitled to get additional DJT shares if the stock trades above certain levels for any 20 of 30 trading days.
If the stock’s “volume-weighted average price” is at least $12.50 for those 20 days, he gets an additional 13.5 million shares. If it’s at least $15, he gets another 13.5 million shares. At $17.50, he gets another 9 million.
The lowest price the stock has seen since it began trading on March 25 is $22.55, according to Yahoo Finance. Barring a total collapse between now and Friday, Trump will get all 36 million shares. The only shares that might be somewhat at risk are the 9 million that depend on a $17.50 “volume-weighted average price,” and given Wednesday’s run-up in DJT’s price, that risk seems minimal.
Sure, the market value of Trump’s current holding of 78.5 million shares has fallen substantially in the past two weeks. But getting another big batch of stock helps mitigate that pain.
However, I suspect that the pain for retail shareholders who own DJT is far from over. In theory, Trump isn’t allowed to sell any of his shares until September 25, which is six months after DJT went public.
But as I have previously noted, Trump Media’s board—which includes his oldest son and several of his political associates—can waive that restriction. Once Trump comes into his 36 million “earnout” shares, cashing out in some way is less risky for him. So don’t be surprised if he asks for that waiver.
