Former President Donald Trump is on the verge of accessing a substantial fortune tied to his stake in Truth Social’s parent company, Trump Media & Technology Group (DJT). This could happen as early as September 25, 2024, when a lock-up period restricting his ability to sell or borrow against his shares is set to expire. While this theoretically opens up a significant financial resource for Trump, potentially to fund his legal battles or his 2024 presidential campaign, numerous obstacles stand in his way, making it difficult for him to capitalize on this wealth without significant risks.
The Lock-Up Period: A Financial Impediment
The lock-up period is a common restriction in financial agreements, preventing insiders from selling large quantities of stock immediately after a company goes public or undergoes a major financial event. For Trump, this restriction has been in place since the merger that formed Trump Media & Technology Group, effectively keeping his hands off his estimated $2.3 billion stake in the company.
However, this period is set to expire by September 25, 2024, possibly even earlier if certain stock performance conditions are met. Specifically, if Trump Media’s stock price averages at least $12 for 20 days within a 30-day window starting August 22, the restrictions could lift as soon as September 20. This would allow Trump to sell or borrow against his shares for the first time.
The Dilemma of Selling: Market Instability
Despite the impending expiration of the lock-up period, selling a significant portion of his shares presents a major challenge for Trump. The stock price of Trump Media has already been under pressure, plunging to below $20 per share and losing 70% of its value since late March. Experts warn that if Trump were to sell a large number of shares, it could further destabilize the stock price, potentially causing it to tank.
Michael Ohlrogge, an associate professor of law at New York University specializing in corporate governance, noted that it would be nearly impossible for Trump to liquidate even a third of his stake without significantly harming the stock price. Such a move could be perceived by the market as a loss of confidence in the company, akin to “rats jumping off a sinking ship,” which could further erode investor trust and drive the stock price down even more.
Trump Media’s stock price woes are compounded by the company’s financial performance, which appears disconnected from its market valuation. Despite a recent selloff, Trump Media is still valued at nearly $4 billion, a figure that many experts believe is inflated given the company’s modest revenue—just $837,000 in the last quarter. The valuation seems to be driven more by Trump’s brand and the speculative nature of the investment rather than solid financial fundamentals.
Jay Ritter, a finance professor at the University of Florida, described Trump Media’s valuation as “grossly overvalued.” He suggests that the company’s worth should be more closely aligned with the cash on its balance sheet, which stands at $344 million. This disconnect between the stock price and the company’s financial reality makes it even more challenging for Trump to offload his shares without causing a sharp decline in value.
Borrowing Against the Shares: An Alternative Route
If selling his stake proves too risky, Trump has another option: borrowing against his shares. Once the lock-up period ends, Trump could potentially use his shares as collateral for loans, providing him with liquidity without needing to sell. However, this approach is not without its own complications. Many traditional banks may be hesitant to lend to Trump, given his contentious history with financial institutions.
Despite this, there may be wealthy individuals willing to provide loans to Trump, either as a business opportunity or to gain favor with someone who could be the next President of the United States. Importantly, if Trump does pursue this route, he might not be required to publicly disclose these loans, allowing him to quietly access funds while maintaining his stake in Trump Media.
As the expiration of the lock-up period on his Truth Social stake approaches, former President Donald Trump faces a complex financial landscape. While he stands to gain access to a significant fortune, the challenges of selling his shares without crashing the stock or finding lenders willing to provide loans against them could limit his ability to fully capitalize on this wealth. The outcome will depend on how Trump navigates these obstacles, which could have significant implications for both his financial future and his ongoing political ambitions.
