For months, former President Donald Trump has been sitting on a social media fortune that he couldn’t touch. That will change very soon.
The lock-up period prohibiting Trump from selling or even borrowing against his $2.3 billion stake in Truth Social owner Trump Media & Technology Group (DJT) is scheduled to expire by September 25, according to filings.
In theory, this will give Trump access to a pot of money that he could use to pay sky-high legal fees or even fund his presidential campaign. In reality, Trump faces huge obstacles that would make it very challenging to sell a large chunk of Trump Media – unless he doesn’t mind crashing the stock.
“It would be all but impossible for Trump to liquidate his whole stake or even a third of it without completely tanking the stock price,” Michael Ohlrogge, an associate professor of law at the New York University School of Law who has specialized in corporate governance and financial regulation, told CNN in a phone interview.
And the share price is already tanking.
Trump Media tumbled another 4% on Wednesday, trading during the session below $20 for the first time since the merger that formed the company this spring.
Trump Media has lost a staggering 70% of its value since late March, a selloff that has accelerated as Vice President Kamala Harris, the Democratic nominee, has gained in the polls against Trump.
That selloff has put a serious dent in Trump’s net worth.
As recently as May 9, Trump’s dominant stake of 114.75 million shares of Trump Media was valued at $6.2 billion.
But Trump couldn’t touch that fortune because, as is typical in deals like this, certain shareholders are subject to a lock-up period that prevents insiders from immediately selling.
According to filings, that lock-up period is scheduled to expire for Trump on September 25, but it could come even earlier.
The lock-up would lift if Trump Media’s share price equals or exceeds $12 for any 20 trading days within a 30-trading day period starting on August 22. As long as the stock doesn’t keep plunging, this would translate to the restrictions lifting as soon as September 20.
The central problem Trump would face in selling most of his stake in Trump Media is that he is the dominant figure for this company.
Not only does Trump own a majority of the shares, he is the most popular user on the company’s central product, Truth Social. The company’s ticker symbol is even “DJT.”
Racing for the exits could easily trigger a loss of confidence in Trump Media
“You don’t see sizable shareholders like President Trump selling a lot of stock because it drives the price down,” said Charles Whitehead, a professor of business law at Cornell Law School. “From the market’s perspective, it may look like rats jumping off a sinking ship.”
Investors would similarly be spooked if Elon Musk suddenly dumped most of his shares in Tesla or Mark Zuckerberg sold a massive amount of Facebook owner Meta.
Some Trump insiders are already selling, perhaps contributing to the recent selloff in the share price.
For instance, Phillip Juhan, Trump Media’s chief financial officer and treasurer, recently disclosed selling $1.9 million worth of stock. Trump Media’s general counsel Scott Glabe, chief operating officer Andrew Northwall and chief technology officer Vladimir Novachki made smaller sales last week too.
Even Devin Nunes, the former Republican congressman who now serves as Trump Media’s CEO and president, dumped $632,000 worth of stock last week.
In Trump’s case, there could be political considerations, too.
“If Trump were to sell a large number of shares and the stock price tanks, to some degree he would be burning his own supporters who bought the stock,” said Jay Ritter, a finance professor at the University of Florida’s Warrington College of Business. “Politically, that may not play out real well for him.”
Another problem is that experts say Trump Media’s price tag defies logic.
Despite the recent selloff, Trump Media is still valued at nearly $4 billion. And that’s hard to square with the fact that the company made just $837,000 in revenue last quarter.
“It’s grossly overvalued,” Ritter said. “It’s hard to come up with a value of the company that is much more than the cash on the balance sheet.”
Trump Media is sitting on $344 million of cash and equivalents, funds the company has said it could use to build out its streaming business.
Ohlrogge, the NYU professor, said the fundamentals “look even weaker” than before Trump Media went public because supporters can’t argue the company is cash-constrained.
“The current price is way higher than can possibly be justified based on fundamentals,” Ohlrogge said.
While Trump may be unable to sell many shares at this point, there is another way he could tap his Truth Social fortune. Once the lock-up period expires, Trump will no longer be prohibited from borrowing against his stake in Trump Media.
That means Trump could pledge some or all of those shares as collateral in a loan.
Of course, as Ohlrogge noted, “a lot of banks are reluctant to do business with Trump due to their past interactions with him.”
But even if banks won’t lend to Trump, rich supporters could.
“It could be a wealthy individual who either thinks it’s good business or they see it as an opportunity to get on the good side of someone who might be the next president,” Ohlrogge said.
Experts say that if Trump does borrow against his Truth Social stake, he may not be required to disclose it.
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