Former President Donald J. Trump's already sizable stake in the social media company will be worth $1 billion in exchange for additional shares in parent company Truth Social, as the company's stock price has remained high in recent weeks. It is expected to jump by more than the dollar.
The windfall comes at a critical time for Trump, who is burdened by hundreds of millions of dollars in legal fees related to multiple lawsuits against him. The presumptive Republican presidential nominee has also stepped up his political activities, with his rising net worth reinforcing his image as a wealthy businessman and becoming a key part of his pitch to voters. ing.
Trump is already the largest shareholder in Trump Media & Technology Group with 79 million shares, currently worth nearly $3 billion. He now plans to acquire an additional 36 million shares in a so-called “earn-out,” which would increase the value of his stake to more than $4 billion.
Earn-out stocks, a feature of mergers, are designed to reward insiders if a company's stock performs well for a period of time after the deal closes. Trump Media merged with a publicly traded shell company last month and listed on the Nasdaq on March 26. The new shares will increase Mr. Trump's stake to about 65% of the company.
The initial frenzy raised the company's value to nearly $8 billion, but the stock has since experienced wild swings and has fallen to about half its peak. Trump Media has become a popular target for short sellers who make money by betting that a company's stock price will fall.
Despite its ups and downs, Trump Media's stock price has remained above the level set to trigger additional stock grants to Trump and other shareholders. Stocks are traded in batches based on whether his stock price traded above $12.50, $15, and $17.50 for 20 of his 30 days during his first two years as a public company. will be awarded. The company's stock, which closed at $35.50 per share on Monday, has traded above all three criteria since its March debut and was on track to meet earn-out conditions on Tuesday.
Like other stocks he owns, Trump is not yet allowed to trade the stock or use it as collateral. At current prices, Mr. Trump would have to wait 150 days, or until late August, before selling his holdings, but if Trump Media's board lifts the restrictions, the stock could sell more quickly. It may be traded.
The company filed to register potentially millions of new shares last week, a routine process that still surprised investors.
Normally, such new stock registrations tend not to provoke a big market reaction, but the unusual ownership of the Trump media, which includes retail traders and Trump supporters, has led to sharp swings in stock prices. If a large number of new stocks enter the market, stock prices could be shaken again.