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How Selling More DJT Stock Makes Trump Richer -- And Shareholders Poorer

How Selling More DJT Stock Makes Trump Richer -- And Shareholders Poorer

Trump plans to water DJT stock by issuing millions of new shares. It’s part of a new Trump scheme to make money for himself and his bankers from a failing company that rang up just $4.1 million in revenue last year and lost more than $58 million.

At its peak, the market valued the company at $8 billion, which, in market terms, is a delusional fantasy. It’s true value is zero, especially if Trump is incarcerated.

The stock watering plan also reminds us that savvy investors and investment bankers make money when stocks fall and rise. Profiting off a loser company is a lucrative but risky and sophisticated game, not one to try at home. Unless you want to be wiped out financially right down to losing your house, since the potential losses to you are unlimited.

Here is how it works: By Issuing millions more shares of DJT, the Trump company ticker symbol, the company will collect cash to keep it going since it isn’t earning a profit or taking in much from customers. The new shares dilute the stock the way a bar watering the gin makes it less potent.

Shorts borrow shares from investors and sell them, paying a fee to the investor. If the stock price falls, the shorts buy back the same number of shares at the lower price, return them to the person they were borrowed from, and keep the difference in price between the sale and re-purchase.

People who hold shares are called longs. They have a long, or ownership position.

Watering helps those who short stocks, called shorts, in two ways.

Shorts borrow shares of stock, paying the investor a fee for the loan of their shares. The shorts then sell the borrowed shares.

Note: If you own a stock brokerage account that allows you to buy on the margin, the investment house can loan out your shares without you knowing it. The brokerage assumes the risk of making you whole if things go awry.

The first way that shorts benefit from stock watering is that millions of new shares become available to sell short. Right now, there are hardly any shares left to borrow and sell short.

For example, if a short sold at $26, roughly the DJT price Monday, and bought it back for $1 later, the profit would be $25 per share less than the fee paid to borrow the shares. In this scenario, the short seller makes a bank vault of cash while the loyal Trump supporter who held onto their shares gets wiped out.

While that’s a nifty and lucrative result, what happens if the stock price rises? Should the stock price rise, say to $51 from $26, the person with the short position would lose $25 per borrowed share. Ouch.

Second, issuing more shares lowers the value of each existing share, putting more downward pressure on DJT.

DJT trading began three weeks ago. DJT shares peaked March 26 at $79.38 and started falling. On April 15, the day Trump’s first criminal trial began in Manhattan, DJT shares traded at about $26. That means the stock has already lost more than two-thirds — down 71%, closing today at $22.84 — from its peak value. Ouch for real.

Trump owns 58 percent of the pre-dilution shares. But he can’t sell his shares for five months under a so-called “lock up” intended to reassure investors that the company isn’t a pump-and-dump scam to run up the share price so the insiders can cash out, leaving the buyers with losses when the stock collapses.

But Donald can still cash in and walk away with a fortune, perhaps several billion dollars, since at its peak, the company was valued at about $8 billion for reasons that have nothing to do with market fundamentals like profits and expectations of future profits.

How would that work?

Donald can pledge his DJT shares to an investment bank. The bank then loans Donald cash secured by those shares.

CEOs have done this for decades, pocketing cash without selling their shares — or having to tell investors! In those deals, the CEO or founder could borrow as much as 90 percent of the share value. If the stock rose, the investment house got the first 35 percent or so of the increase. If the stock fell, as we see with DJT shares, the investment house also makes money because it shorts the stock.

After the price collapses, the investment bank closes its short position by buying back cheap shares, and Trump’s loan is paid off.

The bankers keep the fat fees charged for arranging the deal plus any surplus on the short.

In this case, the investment bank might loan Trump only half of the value of his shares. In that scenario, it would double its money because when the bank closes its short position, its gross profit would be twice as much money as it loaned Trump. And then there are the fees the bank collects for arranging the deal.

It’s a win-win for Trump and the bank — and nothing but losses for people who went long, buying and holding DJT shares as they fell from almost $80 to zero.

At the upcoming April 22 hearing before Justice Arthur Engoron on Trump’s putative bond in the persistent fraud case, New York Attorney General Letitia James should ask if Trump hypothecated his DJT shares and collected cash through a loan against them.

If he did — and I think that is highly likely — this could seriously complicate collecting the nearly half a billion dollars Donald owes in disgorgement and interest. Trump can delay payment while he appeals, but he has no chance of reversing the finding of fraud, only of persuading a court to shave back the size of the award. That, too, seems unlikely for anything but a modest amount of what he owes.

Whether it’s cheating at golf, cheating novice roulette players at the Trump Castle casino, cheating illegal immigrants out of their wages in building Trump Tower, cheating on his wives, cheating insurance companies, cheating on damages from 9/11 — he suffered none but collected big time — cheating on his income taxes, cheating on his property taxes, or trying to cheat by stealing an election and overthrowing the government, remember that Trump is always and everywhere looking to make money for himself with no regard for who gets hurt.

Reprinted with permission from DC Report.
MAGA Suckers Are About To Lose Big Money On Truth Social

MAGA Suckers Are About To Lose Big Money On Truth Social

Like everything else related to Donald Trump, his social media platform Truth Social’s parent company, Trump Media & Technology Group, has been embroiled in a nasty stew of incompetence, greed, and legal warfare. And much of that came to a head Monday as the company lost almost 21.5 percent of its inflated valuation after its much-hyped initial public offering, or IPO.

Despite the one-day collapse, the stock is still grossly overpriced, and a close examination of TMTG’s 8-K filing with the Securities and Exchange Commission shows just how much of a disaster it is—and how much further the stock could plunge. Let’s take a walk through the document.

  • Trump holds 57.3 percent of the company, valued at $8.84 billion as I write this. That means his stake is worth $5 billion. But … that’s just Monopoly money. If he tried to sell, the mass flooding of his shares into a market uninterested in hoovering them up would collapse the price. If he tried to sell, his eventual take would be substantial, but we don’t know what his holdings are really worth. At the moment, he’s forbidden from selling his TMTG shares for six months, though the company’s board (which he controls—more details below) could waive that provision. If they did, it would immediately collapse the share price. If they don’t and Trump has to wait, expect the price to fall in fits and starts over the coming months, because the rest of the 8-K had nothing but horrendous news for the company. As a fun aside, Trump lost around $1.2 billion in paper value today.

  • Since Trump owns more than 50 percent, the filing notes that “a company of which more than 50 percent of the voting power for the election of directors is held by an individual, group or other company is a ‘controlled company’ and may elect not to comply with certain corporate governance standards.” The filing helpfully explains what this means: “Accordingly, investors may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.” Who wants to invest in a company that has fewer stockholder protections, and is owned by Trump? Oh, and seated on that not-independent board? Donald Trump Jr. and Linda McMahon, who ran for Senate in Connecticut twice (and lost).
  • Conservative former Congressman Devin Nunes is paid $750,000 as CEO, despite having zero experience running a tech or media company, and that will go up to $1 million next year. Prior to serving in Congress, he was a farmer. Now, I’m sure you’re thinking, “Gosh, that’s not a lot of money, and there’s no one more qualified at licking Trump’s boots than Nunes. What if he bolts?” Oh ye of little faith, you underestimate Trump’s grifting negotiating prowess! Nunes is also getting a $600,000 “retention bonus”! Keep that number in mind.
  • The company’s chief financial officer Phillip Juhan and chief operating officer Andrew Northwall are getting $337,500 and $365,000, respectively. And you’ll be happy to learn that both of them are also getting $600,000 retention bonuses.
  • So just to be clear, TMTG’s top three officers are making $3.252 million this year. Therefore, we can assume that the company’s revenues are commensurate with such compensation, right?
  • Kash Patel gets $120,000 annually in “consulting” fees, as does Dan Scavino. You might remember Patel as the insurrectionist who Trump attempted to install at the CIA at the last minute. These days, he’s threatening to jail the media if Trump wins in November. Scavino was the longest-tenured member of the Trump administration, ending as Trump’s director of social media, which tells you how effective he was at sucking up to Trump—and how tolerant he was of Trump’s fascism. In fact, former Trump lawyer Jenna Ellis testified that when she told Scavino that Trump had to leave office, he told her, “We don’t care [...] The boss is not going to leave under any circumstances. We are just going to stay in power.” So why do you think two of Trump’s top insurrectionist lieutenants are collecting cushy “consulting” fees from the company?
  • Upon the IPO’s closing, the company took out a $50 million loan at eight percent interest, payable in one year. I’m no expert on this, so I could be wrong, but what I always see post-IPO is that a company will sell a certain percentage of shares to fund whatever expansion/operations are needed. Elon Musk did this effectively at Tesla: Every time the stock price spiked, the company would sell extra shares to raise the money the company needed for its next expansion. The only reasons I can see for TMTG to take out a loan is that 1) it doesn’t dilute Trump’s equity stake, keeping him above 50 percent and that magical “we don’t need to follow the rules” level, and 2) they can declare bankruptcy and never pay it back.
  • Trump Media reported losing $58.2 million on just $4.1 million in revenue in 2023. The bulk of that massive loss comes from $39.4 million in interest expenses. In 2022, the company had a $50.5-million profit on revenue of $1.47 million. And no, I don’t know how you claim a $50 million profit with revenues below $2 million. Maybe they’re counting loans as profit? The 8-K report states, “To date, TMTG has relied primarily on bridge financing, in the form of convertible promissory notes, to build the Truth Social platform.” I count 20 loans totaling $41.7 million, which the company is now paying off (again, rather than using proceeds from the IPO to raise money for the company).
  • Remember, TMTG paid its top three executives $3.252 million for their amazing ability to generate … $4.1 million in revenue. Thank God they granted those generous retention bonuses to keep them around!
  • Uh oh, Elon Musk—they’re coming for your schtick: “TMTG has conducted extensive technological due diligence regarding, and has begun testing, a particular, state-of-the-art technology that supports video streaming and provides a ‘home’ for cancelled content creators, and which TMTG aims to acquire and incorporate into its product offerings and/or services as soon as practicable.”
  • This is just delicious: “TMTG’s success depends in part on the popularity of our brand and the reputation and popularity of President Trump. The value of TMTG’s brand may diminish if the popularity of President Trump were to suffer [...] President Trump is involved in numerous lawsuits and other matters that could damage his reputation. Additionally, TMTG’s business plan relies on President Trump bringing his former social media followers to TMTG’s platform. In the event any of these, or other events, cause his followers to lose interest in his messages, the number of users of our platform could decline or not grow as we have assumed.” The company is literally admitting that its entire business revolves around Donald Trump and his “reputation.” Anyone who puts a dime into this dumpster fire deserves to lose all their money.
  • The filing doesn’t sound all that optimistic: “TMTG expects to continue to incur operating losses and negative cash flows from operating activities for the foreseeable future, as it works to expand its user base, attracting more platform partners and advertisers.” So what is the company doing to attract more users and advertisers? “This growth is expected to come from the overall appeal of the Truth Social Platform.” Ahh, the “vibes” approach to company-building. There is nothing wrong with losing money in order to grow. Most growing businesses do that at some point. But they also don’t go public with a measly $4.1 million in revenue. The norm for Wall Street IPOs is $100 million in revenue and significant year-over-year growth. The idea that a company that has one-third of the revenue of Daily Kos is worth nearly $9 billion is the height of absurdity. And most people know this, which is why this is destined to be a penny stock.
  • This is hilarious: “Since its inception, TMTG has focused on developing Truth Social by enhancing features and user interface rather than relying on traditional performance metrics like average revenue per user, ad impressions and pricing, or active user accounts, including monthly and daily active users.” They don’t report those numbers because they are laughable. They add, “TMTG believes that focusing on these KPIs [key performance indicators] might not align with the best interests of TMTG or its shareholders.” Exactly! If people knew just how pathetic their metrics were, the company’s shareholders would be wiped out overnight.

Now remember, the bulk of TMTG’s expenses are those loans, and it didn’t sell any extra shares to pay them off. So to close this recap, let me quote one more line that perfectly encapsulates the inevitable fate of this company:

[M]anagement had substantial doubt that TMTG will have sufficient funds to meet its liabilities as they fall due.

“Truth,” indeed.

Reprinted with permission from Daily Kos.

As Stock Plunges, Trump Sues His Truth Social Partners

As Stock Plunges, Trump Sues His Truth Social Partners

Former President Donald Trump was set to reap a multibillion-dollar payday from the initial public offering (IPO) of Trump Media and Technology Group (TMTG). But now, it looks like the stock could be worth a fraction of what it initially traded for by the time he can actually capitalize on it.

The stock (trading as "DJT" on the Nasdaq Composite) has already lost nearly $4 billion in value after its first week of trading, cheapening the value of Trump's shares in the company. As a result of the stock's poor performance, Trump has personally lost $1 billion in his estimated net worth as $DJT continues to crater. This has resulted in Trump lashing out at his partners in the business venture, attempting to zero out their shares as punishment for allegedly setting up the company improperly.

Bloomberg reported Tuesday that Trump sued Andy Litinsky and Wes Moss in Florida state court in an attempt to have the court give him their combined 8.6 percent stake in TMTG, which is worth over $600 million. The former president alleges that Litinsky and Moss botched the establishment of the company's corporate governance structure and mishandled its merger with a special purpose acquisition company (SPAC) earlier this year dubbed Digital World Acquisition.

"Moss and Litinsky failed spectacularly at every turn," the lawsuit alleges. "They made a series of reckless and wasteful decisions at a critical time that caused significant damage to TMTG and a decline in the stock price of its merger partner."

Trump's lawsuit in Florida comes after Litinsky and Moss filed their own lawsuit against the former president in Delaware Chancery Court in February. The two investors accused Trump of orchestrating a scheme to "drastically dilute" the value of TMTG's shares in what they referred to as "11th hour, pre-merger corporate maneuvering." While Trump initially had control of 90 percent of the company and had 78 million shares in the company, his business partners alleged that he tried to inflate the number of shares to one billion, which would have reduced their stake to less than one percent of the company.

"[Litinsky and Moss' company was] promised 8.6 percent of this company and sadly its business partners are baselessly trying to renege," attorney, Christopher J. Clark told the Washington Post in February. "They feel like: We made Truth Social for you. You get 90 percent. But some people just aren’t happy with 90 percent."

Trump's business partners alleged that the former president's schemed to artificially create new shares to possibly then give to himself and his family members. Prior to going public last week, the SPAC that facilitated TMTG's merger told the Securities and Exchange Commission that the pending litigation could "negatively impact investor confidence and market perception."

According to Bloomberg, the fact that Trump filed a lawsuit in Florida rather than countersuing Litinsky and Moss in Delaware angered chancery court Judge Sam Glasscock III, who may sanction Trump over the suit. Glasscock was reportedly "gobsmacked" at learning of the former president pursuing separate litigation outside of his courtroom.

While the litigation between Trump and his business partners may have played a role in the nosedive of TMTG's stock, the primary cause for $DJT plummeting by $4 billion in value was a recent filing with regulators. That filing stated that TMTG needed the SPAC's funding to remain operational, and that the company suffered $58 million in losses last year.

In raw numbers, Truth Social remains far below its competitors in the social media world, like Facebook, X/Twitter, Instagram, WhatsApp and TikTok. Truth Social is apparently not even counted among the top 100 apps on the Apple App Store.

Reprinted with permission from Alternet.

Truth Social Founders Sue Trump For Trying To Swindle Them

Truth Social Founders Sue Trump For Trying To Swindle Them

Former President Donald Trump is now being accused in a lawsuit of intentionally devaluing the media company he co-owns with two associates who met him as contestants on his reality TV show The Apprentice.

The Washington Post reported Thursday on the lawsuit filed in Delaware Chancery Court by United Atlantic Ventures (UAV) — a partnership run by former Apprentice contestants Andy Litinsky and Wes Moss. According to the Post, Litinsky and Moss successfully pitched Trump on a tech and social media company branded with the ex-president's name, and agreed to give him 90 percent of the company's stake while they split the remaining 10 percent between themselves and an attorney. The new company — Trump Media and Technology Group (TMTG) — owns and operates Trump's far-right Truth Social platform.

TMTG was set to go public via a merger with a special purpose acquisition company (SPAC) called Digital World Acquisition. However, Litinsky and Moss are now alleging in their lawsuit that Trump sought to "drastically dilute" the shares of the company in an "11th hour, pre-merger corporate maneuvering" scheme.

Initially, Trump's stake was 78 million shares, valued at roughly $3.5 billion. UAV's stake in the company amounted to seven million shares valued at approximately $339 million. However, the lawsuit alleges Trump then engaged in a "dilution scheme" to increase the number of total shares to one billion, which they said had "no legitimate business purpose." UAV accused Trump of possibly scheming to distribute the additional shares among himself and his family, while significantly decreasing their stake in the company to less than one percent.

"[UAV was] promised 8.6 percent of this company and sadly its business partners are baselessly trying to renege," Litinsky and Moss' attorney, Christopher J. Clark — who has previously represented Hunter Biden, Elon Musk, and Mark Cuban — told the Post.

"They feel like: We made Truth Social for you. You get 90 percent. But some people just aren’t happy with 90 percent."

UAV has since threatened to block TMTG's merger with the SPAC, which would significantly delay its plans to go public. The SPAC stated in a filing with the Securities and Exchange Commission that the latest developments could "significantly impact" the proposed merger and "negatively impact investor confidence and market perception."

Reprinted with permission from Alternet.