Former U.S. President Donald Trump is set to receive a stock award worth $1.3 billion from the operating company of his social media app, Truth Social, on Tuesday. This award represents approximately half of the majority stake he already holds in the company.
This bonus will increase Trump’s total stake in the Trump Media & Technology Group (TMTG) to $4.1 billion. Despite agreeing not to sell any of his TMTG shares until September, this unexpected windfall significantly boosts his wealth, estimated by Forbes at $4.7 billion.
Unlike much of his real estate empire, stocks are easily liquidated on the stock market, which could come in handy as Trump faces mounting legal fees and fines, including a $454.2 million judgment in a New York civil fraud case he is currently appealing.
Strong support from Trump supporters has driven a frenzy in the company’s stock price. Last month, the company merged with a Special Purpose Acquisition Company (SPAC) and debuted on the Nasdaq, attracting purchases from Trump backers and speculators, causing its stock price to fluctuate wildly since then.
According to the terms of the SPAC deal, if TMTG’s stock price remains above $17.50 for 20 trading days after its listing on March 26th, Trump is entitled to receive stock bonuses. The closing price on Monday was $35.50, and if the stock price drops by more than half on Tuesday, Trump may not receive the bonus.
TMTG’s current valuation of around $5 billion is about 1220 times the $4.1 million revenue the loss-making company reported in 2023, as shown by data from the London Stock Exchange Group (LSEG).
Other U.S. companies with similar market capitalization do not have such high valuation multiples. Despite warnings in regulatory filings about its operational losses, TMTG’s business prospects have led to “substantial doubt” about its ability to continue operations.
A TMTG spokesperson declined to comment on the award of stocks to Trump but stated, “The Trump Media’s bank deposits exceed $200 million, with no debt, fulfilling all obligations related to the merger, and rapidly advancing its business plan.”
While Trump’s windfall is a huge sum for a small loss-making company like TMTG, the profit structure allowing this is quite common. According to a report by law firm Freshfields Bruckhaus Deringer, over half of management teams received stock rewards in SPAC mergers completed in 2022.
However, as securities lawyer Michael Levitt from Freshfields pointed out, due to many SPAC deals underperforming on the stock market eventually, top executives rarely realize these profit bonuses. TMTG’s situation is unusual because its stock trading is disconnected from its business prospects.
Levitt noted, “Many profits in SPACs have never materialized as many SPAC prices plummet significantly after the merger.”
It is certain that TMTG has made it easier for Trump to reach the profit threshold. When TMTG agreed to merge with the SPAC in October 2021, the projected price of TMTG’s stock had to exceed $30 for Trump to receive full profit bonuses. Regulatory filings show that the agreement was amended in August 2023, lowering the threshold to $17.50.
Without this adjustment, Trump would not have received the full bonus, as TMTG’s stock price was below $30 last week. Nonetheless, based on the terms of the deal, Trump has up to three years after the company’s IPO to receive the full profit, so if the stock price exceeds the threshold for 20 days within any 30-day period during this time, he can still receive the full bonus.
(Information referenced from Reuters.)