Trump Could Net an Additional $1.26 Billion From Truth Social

Former President Donald Trump (L) and former First Lady Melania Trump (R) arrive to vote in Florida's primary election at a polling station in Palm Beach, Fla., on March 19, 2024. Giorgio Viera/AFP via Getty Images

Former President Donald Trump is poised to make over $1 billion from Truth Social’s parent company, Trump Media & Technology Group (TMTG), as he stands to gain an additional 36 million shares in the firm.

After TMTG went public in late March, President Trump held 78.75 million shares in the company. At the time, his stake was valued at $3.9 billion. According to an April 15 filing made by TMTG with the U.S. Securities and Exchange Commission (SEC), some of the stockholders stand to obtain an extra 40 million shares if the volume-weighted average price (VWAP) of TMTG stock equals or exceeds $17.50 per share for 20 days of a 30-day trading period. Tuesday is the 20th trading day that TMTG went public.

During this period, the share price has not traded below $17.50. As such, if the stock remains above this level on Tuesday as well, stockholders, including President Trump, may be entitled to 40 million additional shares.

According to the filing, President Trump is set to receive 90 percent or 36 million of these shares. As of 09:35 a.m. ET, TMTG was trading at around $35 per share, which makes the 36 million shares worth $1.26 billion. TMTG shares are up over 100 percent so far this year.

The addition of 36 million shares would push up President Trump’s stake in TMTG from 78.75 million shares to 114.75 million, and he will subsequently own a 64.9 percent stake in the company. At current share prices, 114.75 million shares would be worth more than $4 billion.

The additional “earnout shares” received by President Trump could be subjected to the same lock-up period restrictions that already apply to major TMTG stakeholders.

Large shareholders are subject to a lock-up period of six months, during which time they are prohibited from selling their stake.

However, even without the lock-out period, it would be challenging for President Trump to cash out since any move to sell from his side could crash the stock with him being the biggest TMTG shareholder.

In the SEC filing, TMTG admitted that the company’s success “depends in part on the popularity of its brand and the reputation and popularity” of the former president.

“Adverse reactions to publicity relating to President Donald J. Trump, or the loss of his services, could adversely affect TMTG’s revenues and results of operations,” it said. In addition, “President Donald J. Trump is the subject of numerous legal proceedings. An adverse outcome in one or more of the ongoing legal proceedings could negatively impact TMTG.”

Another SEC filing showed that TMTG made $58.2 million in losses last year while bringing in $4.1 million in revenues.

Naked Short Selling, Streaming Platform

While TMTG shares have surged this year, CEO Devin Nunes recently raised concerns about naked short selling in an April 18 letter to the Nasdaq CEO Adena Friedman. “I write to bring your attention to potential market manipulation of the stock of Trump Media & Technology Group Corp,” he wrote.

“Naked short selling—selling shares of a stock without first borrowing the shares of stock deemed difficult to locate—is generally illegal pursuant to Securities and Exchange Commission (SEC) Regulation SHO. As of April 17, 2024, DJT appears on Nasdaq’s ‘Reg SHO threshold list,’ which is indicative of unlawful trading activity.” Reg SHO is a set of SEC rules that regulates the practice of short selling.

Mr. Nunes called the situation “particularly troubling” given that naked short selling is usually done by sophisticated market participants who make profits at the expense of retail investors.

“Reports indicate that, as of April 3, 2024, DJT was ‘by far’ ‘the most expensive U.S. stock to short,’ meaning that brokers have a significant financial incentive to lend non-existent shares.”

The TMTG CEO noted that just four market participants, Citadel Securities, VIRTU Americas, G1 Execution Services, and Jane Street Capital, accounted for more than 60 percent of the “extraordinary volume” of TMTG shares traded.

“In light of the foregoing, and Nasdaq’s obligation and commitment to protect the interests of retail investors, please advise what steps you can take to foster transparency and compliance by ensuring market makers are adhering to Reg SHO, requiring brokers to disclose their ‘Net Short’ positions, and preventing the lending of shares that do not exist.”

On April 23, TMTG gave shareholders certain tips to prevent the lending of their shares by brokerages for the purpose of short selling.

It asked shareholders to keep their shares in a cash account at their brokerage firm rather than in a margin account. Shareholders should also consider “opting out of any securities lending programs, which should stop their broker from lending their shares,” the company said.

Meanwhile, TMTG recently announced the completion of the research and development phase of its new live TV streaming platform. The company plans on scaling up its own content delivery network (CDN).

“The streaming content is expected to focus on live TV including news networks, religious channels, family-friendly content including films and documentaries; and other content that has been canceled, is at risk of cancellation, or is being suppressed on other platforms and services,” TMTG said.