Last Wednesday night at Mar-a-Lago, Donald J. Trump mingled with partygoers, greeting and making small talk with supporters. Country star Lee Greenwood sang “God Bless America,” and the former president’s eldest son, Donald Jr., gave a speech.
The elderly Trump was presiding over a cocktail reception for about 150 guests celebrating the public opening of Trump Media & Technology Group, the parent company of his social media app Truth Social. Trump Media’s stock price soared on its first day of trading, adding billions of dollars to Trump’s fortunes.
However, the party was by no means extravagant. Visitors munched on cookies emblazoned with the company’s stock symbol “DJT.” They were invited through the free Paperless Post app and were told they could not bring their plus-ones, according to a copy of the invitation.
Trump didn’t shy away from being frugal. He told guests that the advantage of Truth Social is that it “doesn’t cost a lot to operate.”
From the moment Trump Media was founded in 2021, Trump has treated it as a low-cost, low-effort venture. Although he previously served as chief executive officer and owned nearly 65 percent of the company’s stock, he was only marginally involved in its day-to-day operations, primarily posting on Truth Social and managing its business with others. I also delegate to others. He has at times considered working on competing ventures, according to court filings, company records, former employees and five people familiar with the company.
Trump now finds himself in a strange position, with his financial future hinged on an endeavor that at times seemed indifferent. Trump Media’s Wall Street debut in March made Trump’s stock a multimillionaire worth more than $5 billion. It tripled his net worth and provided a potential financial lifeline as he runs for president and tackles the costly legal costs associated with the civil and criminal lawsuits against him.
But his newfound fortune is unstable. Trump Media, founded by two former “The Apprentice” cast members, has been embroiled in Securities and Exchange Commission investigations and insider trading probes over the years. There’s no better product than Truth Social. Truth Social had low viewership and in his first three months of the year he made $770,000 in revenue but lost $328 million. Still, the market valuation is over $7 billion.
“This is one of the most clearly worthless stocks I’ve ever seen,” said Alan Jagorinser, an accounting professor at the University of Cambridge.
Mr. Trump’s prosperity is only wealth on paper. Trump Media’s stock price has been volatile, fueled by amateur traders who often ignore the fundamentals of the business. Additionally, under rules common to merger agreements and public offerings, Trump cannot sell his shares until September, which limits him and other large investors from immediately converting their shares into cash. . If he sells his shares, smaller shareholders could take it as a signal to flee.
“The stakes for the Trump media fortunes are very high,” said Mike Stegemoller, a finance professor at Baylor University. “You’re now dealing with property that is somewhat disconnected from reality.”
Representatives for Mr. Trump did not respond to requests for comment. Trump Media spokeswoman Shannon Devine said the New York Times report about the company was “full of misleading insinuations and outright lies, supported by supposed experts who happen to share the author’s biases.” “
Are you committed or not?
Trump Media is not Trump’s invention.
After Trump leaves the White House in 2021, two of his reality show, The Apprentice season two contestants, Wes Moss and Andy Liczynski, have started using social media built around Trump’s brand. He pitched the platform idea to Trump.
Trump had just been banned from Twitter following the Jan. 6 riot at the Capitol. Moss and Liczynski argued that if the former president started his own social media company, he would not be deplatformed again.
In February 2021, Trump signed a deal with the two to launch Trump Media. He received 90 percent of the venture’s shares and the title of chief executive officer. All he had to do was give it his name.
Moss and Litinksey oversaw the hiring of engineers to build Truth Social, which would primarily cater to conservatives, with the goal of releasing the app within about a year.
But even before the app was built, Moss and Litinksey wanted to take Trump Media public through a merger with a “special acquisition vehicle.” SPACs are shell companies that raise money by going public on Wall Street and then finding private companies to merge with, allowing those companies to avoid the scrutiny typically associated with initial public offerings.
Trump left the details to the “Apprentice” duo. Liczynski, a right-wing radio personality, has solicited hundreds of SPAC deals. It was “no different than picking up the phone to sell insurance,” he testified last month in federal court in a case related to the merger process.
He eventually found Patrick Orlando, a former Deutsche Bank trader who was working on forming a SPAC called Digital World Acquisition Corp.
Mr. Moss and Mr. Litinsky invited Mr. Trump to a meeting to approve the merger. In February 2021, Orlando arrived at Mar-a-Lago to speak with the former president. Trump played golf with golf champion Jack Nicklaus, according to company records.
At another meeting, Mr. Trump led a group on a short tour of Mar-a-Lago and detailed a zoning dispute with local officials in Florida, according to a video reviewed by the Times.
Trump occasionally met with Trump Media investors, but relied heavily on Donald Jr. to represent his interests, according to company records and two people familiar with the meetings.
But in the end, Liczynski testified, the elder Trump was the “ultimate decision maker” on the SPAC deal.
But as negotiations progressed, Trump considered abandoning Trump Media, according to company records kept by former executives. He met with a rival startup called Gettr, a conservative social media platform led by former campaign staffer Jason Miller.
In September 2021, Liczynski and Moss persuaded Trump to sign a licensing agreement with Trump Media. Under the terms, Trump must post messages on Truth Social before publishing them on other platforms. Mr. Trump received no additional money from the deal, but it included a clause that allowed him to waive his commitments if the merger took too long to complete.
Some members of Digital World’s board had concerns about the merger with Trump Media. Board member Lee Jacobson complained on an October 2021 conference call that Trump Media was taking a “cowboy approach” when financial projections didn’t match up, according to a recording filed in court. .
Orlando quelled the opposition, insisting the deal was a “once in a lifetime opportunity.”
legal cloud
On the morning of October 20, 2021, the Trump Media and Digital World merger documents were ready for a signing ceremony at Mar-a-Lago. Then I got a call from Trump.
On the other side was Mr. Miller, who ran Gettr. Mr. Liczynski testified in April that Mr. Miller once again wanted Mr. Trump to join his app. Mr. Trump, apparently undecided on what to do, summoned Mr. Liczynski to his Mar-a-Lago office and asked him to pitch the rationale for a merger with Digital World. Liczynski said he was concerned the former president would renege on the agreement.
Trump ultimately did not join Gettr. Later that day, he and Mr. Orlando signed a merger agreement during a meeting at Mar-a-Lago.
Trump Media’s next step was to release Truth Social, which officially debuted on February 21, 2022. “The president wanted a Ferrari, so they built him a Ferrari,” Trump Media chief legal officer Lori Heyer Bednar said at the time. . However, the site was initially plagued by glitches and complaints.
Trump’s account soon published its first post, vowing to become an active user. Trump did not write or post the message. A Trump media executive did so, according to a video reviewed by the Times.
Legal hurdles soon arose, delaying regulatory approval for the merger. In late 2021, the SEC launched an investigation into the merger, while prosecutors prepared separate insider trading charges against a group of early Digital World investors. (No one in the Trump media was charged with wrongdoing). Until these legal issues are resolved, Trump Media’s public debut could not move forward.
With the deal in jeopardy, Trump moved to tighten his control over Trump Media, asking Liczynski in late 2021 or early 2022 to transfer his shares in the company to his wife, Melania, according to court records and people familiar with the matter.
Mr. Liczynski refused. In the spring of 2022, Trump expelled him, according to a lawsuit Litinksy and Moss later filed against Trump Media. Mr. Moss left a few months later. He was replaced by former Republican congressman Devin Nunes as Trump Media’s chief executive. Trump’s title was changed to chairman and his son Donald Jr. joined the board.
By then, Trump had become more active on Truth Social, where he now has 7 million followers. He frequently posted about prosecutors and political opponents and claimed the 2020 presidential election was stolen from him.
But Trump Media was struggling to survive. The company warned in a regulatory filing that it could go out of business if the merger is not approved soon.
Last July, Digital World agreed to pay $18 million to the SEC to resolve charges that it misled investors about its deal with Trump Media. The settlement lifts a legal cloud. Trump received a new type of stock that gave him majority voting rights in the company, and Trump Media recommitted to the merger.
On February 14, the SEC approved the merger agreement. The company’s path to the stock market has begun again.
“People can’t stop us”
At a cocktail party at Mar-a-Lago last month, Trump thanked some of Trump Media’s early investors and chatted with longtime supporter actor Jon Voight. . Trump declared to an audience that included several conservative influencers that his app would be bigger than Twitter, currently known as X.
“All I know is that even if I raise my voice, people can’t stop us,” he said.
Any reservations Mr. Trump had about the Trump media appeared to be dispelled. On March 23, the day after Digital World’s shareholders approved the merger, Trump posted a short message on the app that read, “I love Truth Social.”
The company began public trading on March 26, and its shares soared 32% in the first two days, closing at about $66.
After the injection of new stock from the merger, Mr. Trump’s 90% stake in Trump Media fell to about 65%. But he remains the company’s single largest shareholder with about 115 million shares, including 36 million he received last month in the form of a bonus for strong stock trading.
Mr. Trump also stepped down as an officer or director of the company. He did not explain why, but Trump Media’s ethics rules state that employees and directors engaged in political activities are “expected to conduct their political activities as private citizens.”
The company’s future is not guaranteed. Truth Social has outperformed other right-wing apps, but it had just 1 million unique visitors in April, a fraction of X’s traffic, according to internet tracker Similarweb. The company’s revenue comes solely from advertising, including patriot-themed apparel and Trump paraphernalia. The first-quarter loss of $328 million, which the company reported Monday, was due to the impact of merger-related costs.
In September, Trump will be able to begin selling Trump Media stock or use it as collateral for loans. If he were to sell on the open market, investors could take that as a negative sign and dump their shares, hurting the stock price. To avoid that, Mr. Trump could try to negotiate a private sale that would cash out some of his company’s stock without causing a market panic.
“We’re going to have to have deep discounts,” said Jagorinser, the accounting professor. “The red flag is really bright.”
kitty bennett Contributed to research.
