No. Not the kind of lock-up you’re thinking of, and hoping for. Not the put him in jail and throw away the key variety. This lock-up is a financial one related to his March 22, 2024 merger with Digital World Acquisition (DWA) (now, since April 1, known as Trump Media & Technology Group Corporation, trading on NASDAQ as DJT). First some needed background (also check out my recent post, Trump’s Truth Social Merger, A Wall Street Platform to Fleece His MAGA Investors?) The gestation and birth of TJT on NASDAQ is a complicated affair as is Trump’s habit with financial affairs. After explaining the background – some financial, some political – this post will examine how Trump might use his stock ownership in DJT as his personal piggybank and, of course, what legal and contractual obligations he may have to subvert and skirt to do so.
Background: Let’s Start with a Boring, but Fun, Look at Donny and the SPAC!
Trading as Digital World Acquisition Corporation since late September, 2021, the company was not initially associated with Trump, however, in October 2021, Trump decided to work out a merger with DWA, a so-called special purpose acquisition corporation (SPAC) whose price has nothing to do with physical products it sells, its coin of the realm is access to membership in the stock market. SPACs exist only to bypass the normal route to the market, through initial public offerings (IPOs) to more easily avoid IPO rules and regulations. SPACs were controversial then (and still are, but less so today due to new SEC SPAC rules), and Trump reached his deal with a member of the booming SPAC sector in the heyday of what the New York Times then called “an unregulated and sometimes shadowy corner of Wall Street,” often called blank check shell companies.
And Trump covets blank checks, and especially SPACs since their requirements to disclose their financial and other business information is relatively thin, for instance, they refused to disclose Truth Social’s user numbers, something an IPO must do, and obviously important data for possible investors. for making material misrepresentations in forms filed with the SEC as part of DWAC’s initial public offering and proposed merger with Trump Media & Technology Group Corp. (TMTG). The Commission finds that DWAC misled investors and the SEC by failing to disclose that it had formulated a plan to acquire and was pursuing the acquisition of TMTG prior to DWAC’s IPO. SEC’s finding disclosed serious fraud, perhaps involving pre-merger, nondisclosed discussions with Donald Trump.
“DWAC made “material misrepresentations in forms filed with the SEC as part of DWAC’s initial public offering and proposed merger with Trump Media & Technology Group Corp. (TMTG). The Commission finds that DWAC misled investors and the SEC by failing to disclose that it had formulated a plan to acquire and was pursuing the acquisition of TMTG prior to DWAC’s IPO. . . [A]s found in the SEC’s order, dating back to February 2021, an individual who would later become DWAC’s CEO and Board Chairman, and others involved with DWAC, had extensive SPAC merger discussions with TMTG.” [Emphasis added]
Background: Let’s Start with a Boring, but Fun, Stock Price CHART!
Over approximately 18 months as the deal was structured, and as soon as Trump’s involvement with UWA became known its stock rose from $9/share to $94 within two weeks, reaching an all-time high of $97.4 by February 28, 2022. It then, rudely, dropped precipitously from that high over the next 16 months to $12.60, losiung 87% of its value. How did this happen? Well, for very Trumpian reasons all well chronicled by CNBC here, but which include loss of big investors amounting to a billion dollars, SEC and DOJ investigations about DWA’s machinations, and Trump’s continually worsening legal quicksand of charges, civil and criminal during that time period.
However, despite these problems, as the SEC/DOJ threat subsided (the SEC approved the merger), and possible pre-election trials and convictions became less likely. Primarily, though, thanks in part to MAGA retail investors, DJT (trading pre-merger as DWA) recovered during the week of Trump’s Iowa Caucuses victory in mid-January 2024, a 94% increase form its pre-caucuses close. Then came the merger on March 22, and on merger day UWA/DJT rose 192%, from $22.35 to $66.22/share.
However, since April 1, the first the intervening eight trading days have not been good to Mr. Trump’s enterprise as it dropped a not-so-stunning 54% as investors poured in, this time to sell a company that has no earnings, few products, no apparent ideas, and which is led by the greatest con man in world history, and his cronies, including poor Donny Jr. Notice in the price chart, most investors after the March 22 merger date got in DWA/DJT stock at a price well above its present price, as of this writing $31.00/share. So, since the big pre-merger run up to $66.22 DJT is now down 53%. Waking to this, perhaps, even MAGA fans, either cutting losses or, Trump style, taking gains might have abandoned ship?
During this weekend I will publish part two of this posting: A Financial Lock-Up That’s Guarded with Paper Barbed Wire. This will reveal that even after this 50%+ drop in price, Trump, who owns 54% of DJT’s stock, is still sitting atop a mountain of potential cash. His problem, of course, is how exactly does he get to that windfall? There are a number of ownership rules for major stockholders that are in place to prevent such big players from dumping stock for up to six months. However, the seeming strength of those rules weaken considerably when examined closely. And that topic, in detail, is slated for my next posting. And, so I am not burying the lede, Trump has a few routes to grabbing the money and running, which I believe he will try and use, and with vigor.