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Last week, Donald Trump looked to be in dire straits, both legally and financially. He owed four hundred and fifty million dollars in legal penalties after a New York judge found that he fraudulently inflated the value of his assets in order to get bank loans, on top of the eighty-three million dollars he owed after losing a defamation case brought by the writer E. Jean Carroll, who has accused Trump of sexual assault. (He also faces several smaller judgments for defying a subpoena, disparaging a law clerk, and contempt of court.) Despite Trump’s repeated claims to be a billionaire, his legal team told the court that he didn’t have enough cash on hand to resolve the first judgment, and that he had been unable to find anyone to lend him the money or finance a bond until he could pay. In the end, the court allowed him to post a smaller bond, but only gave him ten days to come up with the full amount. If he does not, then Letitia James, New York’s attorney general, will be able to start seizing his assets.
This week, though, Trump appeared to be handed a lifeline: Trump Media and Technology Group—the social media company through which he owns Truth Social, a Trumpian clone of X—merged with Digital World Acquisition Corporation, a special-purpose acquisition company, or SPAC. (A SPAC is an investment vehicle created for the purpose of buying other companies and taking them public.) The combined entity, now known as Trump Media and Technology Group, went public on Tuesday and quickly hit a market value of around eight billion dollars. Since Trump owns about 60 percent of the shares, his net worth has suddenly risen by more than four billion dollars.
So is Trump on easy street now, with such vast resources that he no longer needs to worry about his legal penalties? Not exactly. Both he and Trump Media must clear a number of roadblocks before that happens. Success is by no means assured. And either way, business appears to be tied up here, to an unusual extent, with politics.
While the market value of Trump’s shares in Trump Media (which trades under the stock symbol DJT) stands at around four billion dollars, he can’t simply sell those shares or even use them as collateral on a loan to pay his legal bills, at least not right away. Under the terms of the merger involving Truth Social, Trump’s shares are locked up for six months, which means that they can’t be sold and can’t be used to backstop a loan either—in theory, anyway. Could Trump get around this block? It’s technically possible: The board of directors could waive the lockup restriction and allow Trump to sell some shares or borrow against them. And the board includes some close Trump confidants, including his son Don Jr. and three former members of the Trump administration, who might look favorably on such a request.
It’s not quite that simple, though. If Trump were to sell enough of his shares to raise the money he needs to pay off the four hundred and fifty million dollar judgment, it could cause the market value of the company’s shares to plummet—that’s the reason why lockups exist in the first place. And Trump Media likely won’t want to make investors or the market any more nervous about the stock price than they already are—because, while the company has had a strong debut, its underlying finances are precarious. Truth Social—the company’s only real operating asset—had just over five million visitors last month, according to one estimate. (For comparison, X, hardly in fine fettle under Elon Musk, had more than two hundred and fifty million visitors a day.) According to Digital World’s regulatory filings, the company made just over three million dollars in advertising revenue in the first nine months of this year. It recorded a loss of almost fifty million dollars.
As the New York Times put it, somewhat dryly, “by most traditional measures, Trump Media’s valuation is inordinately high”—indeed, it is trading at a thousand times its estimated annual revenue. Even in the world of so-called “meme stocks”—which trade more on hopes, dreams, vibes, and virality than on business fundamentals, appealing to dubious belief or gambling impulse on the part of mostly neophyte investors—this is a stratospheric proportion. Reddit—the online community that just went public (as I wrote in this newsletter two weeks ago), and is also perceived to have had a relatively strong start on the stock market—is trading at around ten times its annual revenue, which seems tame by comparison. Nvidia, which makes the chips that are used in everything from cryptocurrency to artificial intelligence engines, has soared in value by almost 300 percent in the past year alone and is now worth two trillion dollars. But even that company is only trading at twenty-five times its revenue.
So why is Trump Media selling at such astronomical prices? Investment experts say that it is not merely a meme stock but a political meme stock, which combines the dice-rolling aspect of regular meme stocks with the Trump-promoting fervor of MAGA acolytes. Jay Ritter, a finance professor at the University of Florida who has long studied IPOs, told Vanity Fair that meme stocks often depend on the “greater fool theory of investing,” whereby rational investors expect that a stock will rise and so bet that they can sell their shares to “a fool” willing to buy them at a higher price. In the case of Trump Media, Ritter said, “you’ve got ideology involved [and] my suspicion is most of them have bought the stock as a show of political support.”
With the merger and public offering, Trump may have come up with a way to raise money not only for his legal bills, but for his presidential campaign. Both of these strategies, however, will rely on the stock continuing to do well in the public markets, and this remains an open question. Apart from Trump Media’s money-losing status and lack of any real sources of revenue growth, it’s not clear that the MAGA cohort alone will be enough to sustain the share price. And as the Times noted, going public means that Trump Media will draw more scrutiny from regulators, who will now be able to pore over its quarterly financial reports and look for irregularities.
Even before the merger, Trump Media was on the radar of regulators: the deal was significantly delayed, and almost derailed, by a Securities and Exchange Commission investigation into discussions that the company held with Digital World. (SPACs aren’t supposed to have a specific acquisition lined up before they go public, and securities regulations prohibit them from engaging in any “meaningful” merger talks with a specific entity.) According to federal prosecutors and the SEC, some insiders allegedly made trades knowing that Truth Digital was the target of the merger. Digital World eventually settled with the SEC and paid a fine of eighteen million dollars. It revised its public filings before the IPO was completed.
No meme stock would be complete without some attendant conspiracy theories, and Trump Media is no different. In this case, one popular theory revolves around Jeffrey Yass, a billionaire Wall Street financier and prominent donor to the Republican Party. Susquehanna International Group, a trading firm controlled by Yass, was the largest institutional shareholder of Digital World prior to the merger and is also a major investor in ByteDance, the Chinese company that owns TikTok. This month, the House of Representatives passed a bill aimed at forcing ByteDance to sell TikTok. According to the Times, the conservative Club for Growth has been lobbying Republicans in Congress to oppose an outright TikTok ban. Yass has reportedly helped to fund that effort.
When Trump was president, he mounted a campaign to force ByteDance to sell TikTok to a US company and even issued an executive order banning the app, which I wrote about at the time. TikTok, he said, was a “national emergency.” This month, however, Trump reversed course and essentially took the Club for Growth line. (Banning TikTok, he says now, would only help Facebook—which has been “very bad for our country, especially when it comes to elections”—and its owner Mark Zuckerberg, or as Trump calls him, Mark “Zuckerschmuck.”) Given Yass’s stance on TikTok and his investment in Trump Media, some observers wondered whether a quid pro quo was at issue here. Trump has said that he met recently with Yass, but that the subject of TikTok didn’t come up in their meeting. Susquehanna, Yass’s firm, has said that it has “zero economic interest in Trump Media,” the merged entity, pointing out that its “long position is offset by short positions of the same size.”
Whatever Yass’s involvement, questions remain, both political and financial. Will Trump Media somehow become the kind of business that justifies an eight-billion-dollar market capitalization, or will its price ebb and flow based on the whims and obsessions of the MAGA crowd and meme-stock traders looking for a greater fool? Or will we see a repeat of what happened the last time there was a stock with the symbol DJT? The ticker was last used for Trump Hotels and Casino Resorts, which went public on the New York Stock Exchange in 1995. That company lost money every year that it was in business. In 2004, it filed for bankruptcy protection. Recently, it’s been tempting to gauge Trump’s financial ups and downs in terms of weeks, even days. But the correct metric might be years.
Other notable stories:
- The collapse of the Francis Scott Key Bridge in Baltimore on Tuesday continues to dominate the news cycle; yesterday, divers recovered the bodies of two construction workers. (Four of their colleagues are also presumed dead but have yet to be located.) In the wake of the collapse, Brandon Scott, the mayor of Baltimore, asked news organizations to stop showing video of the incident; Scott argued that the footage was “traumatizing our community,” but Kelly McBride, a media ethicist at Poynter, told her colleague Tom Jones that she doesn’t see using it as “particularly insensitive” as long as doing so advances the story. Meanwhile, online, conspiracy theories about the cause of the collapse—which, in reality, was triggered by a ship crashing into the bridge—exploded, with everything from President Biden to vaccines getting blamed.
- With the 2024 campaign cycle in full swing, Vanity Fair’s Charlotte Klein checked in on Politico, which has a “comparatively solid” business model but faces challenges related to its “identity, amid stepped-up competition in Washington and shifting editorial priorities.” A new leadership team is “pushing staffers harder,” which some see “as the sharpening and discipline Politico has been lacking” but others view “as micromanagement bogging down a newsroom built on speed,” Klein reports. “We’re having an incredible DNA change with no guarantee that it’ll work,” one employee told Klein. Said another: “There’s no clear vision for what they want from us, and it sort of changes day to day. People feel really demoralized and frustrated.”
- Carolyn Cole and Molly Hennessy-Fiske—two journalists, then both with the LA Times, who were assaulted by law enforcement in Minneapolis while covering the protests that followed the police murder of George Floyd in 2020—settled a lawsuit that they brought against the Minnesota State Patrol for $1.2 million. “Hennessy-Fiske was shot at least five times in the leg with projectiles and a tear-gas canister, which left her bloodied and bruised,” the Minneapolis Star Tribune reports, while Cole “suffered a corneal abrasion and chemical burns on her eye and skin” that left her “screaming in agony.” (The Minnesota State Patrol did not admit any wrongdoing as part of the settlement.)
- In media-jobs news, the union representing staffers at G/O Media said that two of its members were laid off as a result of the company selling The Takeout and the AV Club this week. Elsewhere, staffers at KCUR, a public radio station in Kansas City, Missouri, announced their intention to unionize. And—one year after the Scott Trust, which owns The Guardian, apologized for the role that its founders played in the international slave trade—the paper hired new correspondents to cover the Caribbean, Africa, South America, and inequality in the UK, part of a commitment it made alongside its apology.
- And Simon & Schuster backed out of publishing a book by Alex Thompson, a political reporter at Axios, about the Biden White House—a “further reflection of the soft market for books” about the president, Politico reports. According to NPD BookScan, recent Biden books by leading journalists have sold as few as a few thousand copies—a fraction of the sales chalked up by similar books about the Trump White House. Thompson is still working on his book and actively seeking another publisher.
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