Trump To Acquire $4B In ‘Paper Wealth’ On ‘Money Losing Company That Generates Less Than $5M’

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This is a classic Trump story. You can’t get better than this. Truth Social, ludicrous debacle that it is, is an allegory for Donald Trump himself. It’s a flim flam social media site, put together by the ultimate flim flam man. You will see headlines today that will shriek in large font, “Trump Media Merger Wins SEC Approval, Huge Windfall” bla bla bla. So by all means, open up the pieces and read them because this is what you will find the actual reality is. Washington Post:

Digital World Acquisition, the SPAC that first launched the merger for Trump Media and Technology Group in 2021, said in an SEC filing late Wednesday that the SEC had signed off on its registration statement and that Digital World would announce a shareholder meeting within two days to vote on the merger’s adoption. Digital World shares climbed Thursday morning, to about $50.

The approval is a victory for Trump, who will hold more than 78 million shares in the post-merger company, a filing shows — a stake that, at current prices, would be worth nearly $4 billion. Trump, who would own between 58 and 69 percent of the company, and other investors could earn tens of millions more shares per a provision, known as an “earnout,” tied to the stock’s performance, a filing said.

Wow. Four billion is a lot of hamberders, right? Then take a look.

Jay Ritter, a finance professor at the University of Florida, said the windfall is “paper wealth … with the emphasis on ‘paper,’ since his [Trump Media] shares cannot currently be sold.”

Trump Media’s key stockholders, including Trump and its management team, agreed to a common financial provision, known as a “lockup” period, that prevents them from selling shares for six months after the merger unless Digital World waives the agreement, according to a Digital World filing. If the merger occurs in April, for instance, Trump would not be able to sell his shares until October, at which point their value may have changed considerably.

Oh, ya think? Really? Because by October, Trump could have one or two convictions under his belt. Maybe more contingent on court calendars and how Trump keeps managing to delay things indefinitely. But putting all that to the side, the plain fact of the matter is that the merged company’s valuation — roughly $9 billion, based on Digital World’s current price — is out of sync with the Trump company’s financial performance. At least according to this expert. Trump Media generated $3.4 million in revenue and lost $49 million during the first nine months of 2023, Digital World said in a recent SEC filing. Frankly, I’m amazed it even generated the $3.4 million, but let’s grant for the sake of argument that it did. So how is a company that lost $49 million last year worth $9 billion, after this merger? Answer: its not.

This is why I say this is an allegory for Trump himself. It’s a pipe dream. It’s smoke and mirrors. This is like the rest of Trump’s billions, in his head and on paper.

Trump Media is “a money-losing company that generates less than $5 million per year,” Ritter said. Digital World, he said, is in his view “a classic meme stock, whose price is totally unrelated to the underlying fundamentals.”

Trump Media’s chief executive, the former Republican congressman Devin Nunes, said in a statement late Wednesday that the company aimed “to accelerate our work to build a free speech highway outside the stifling stranglehold of Big Tech.” And Digital World’s chief Eric Swider said the “achievement marks a significant milestone.”

But the merger would also open the company to the scrutiny and uncertainty of public markets, where investors could buy and sell shares based on the performance of Truth Social, its sole product. Though it remains Trump’s main online megaphone, the site has struggled to build a user base that would compete with the social media giants Trump initially said it would overtake, including Facebook and X, formerly called Twitter.

A federal prosecution of three early Digital World investors, who investigators said made tens of millions of dollars in insider trades related to the merger deal, is also scheduled to go to trial in April. In a superseding indictment filed last week in federal court, prosecutors added a charge of money laundering to one investor, Michael Shvartsman, saying he used some of his profits to buy a $14 million luxury yacht he later renamed “Provocateur.” Trump, Trump Media and Digital World have not been accused of wrongdoing in the case.
And there are other disputes, like the former CEO of the company suing for past due compensation. And there’s this.
Michael Ohlrogge, a New York University associate professor, said Trump’s post-merger company could raise conflict-of-interest concerns for the Republican presidential candidate, given that companies and foreign governments could deliver him money indirectly by buying ads on Truth Social. Trump’s businesses received more than $7 million in payments from foreign governments, including officials in China and Saudi Arabia, during his presidency, according to a House Oversight Committee report released by Democrats last month.
Just as the advent of Trump has provided us all a primer in constitutional law, next we’re going to get one in business law and in kind contributions. Just another side show in the Republican circus.
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4 COMMENTS

  1. None of this computes. trump Media may have generated a little revenue, but it has probably never turned a profit after expenses. And since in this sort of company the share value is set by dividends paid to shareholders, which come from profits, I’d predict all that paper is probably going to become worthless, hopefully in less than six months.

  2. “free speech highway?” Really nunes? Or do you actually mean “free speech highway so long as you fluff dingleberry”. Yeah. I think it’s the second one.

    Sorry man, I”m still trying as hard as I possibly can to figure out how that p.o.s nonsense dingleberry rage texts on is in any sense, including monopoly money sense, worth 5B. Nope. Not today. Not tomorrow. And as long as dingleberry has anything to do with or any connection to the company–not ever. Don’t know who creates these monetary values, paper or otherwise, but they are as full of shit as a cow byre after a long, cold winter.

  3. “So how is a company that lost $49 million last year worth $9 billion, after this merger? Answer: its not.”

    They’re using “Hollywood math.” Remember the Buchwald v Paramount suit? Art Buchwald had come up with a story–and sold it to Paramount–that would, eventually, become the film “Coming to America.” However, when that movie came out, Eddie Murphy had the sole story credit and Buchwald sued Paramount for breach of contract. After the court determined that Paramount had broken its agreement and went into deliberation over the amount that Buchwald was owed, Paramount testified that, even though the movie made $288 million, the studio had spent so much money in development and marketing, it didn’t make any “net profit.” Over the next few years, people started calling this “Hollywood math.” (Gods, the details of Paramount’s “formula” for determining a “net profit” are excruciatingly absurd.)

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Never doubt that a small group of thoughtful, committed citizens can change the world. In fact, it's the only thing that ever has. — Margaret Mead

Never doubt that a small group of thoughtful, committed citizens can change the world. In fact, it's the only thing that ever has.

— Margaret Mead