Cha-ching! Trump on track for $1 billion stock bonus - while outside investors lose up to 50%

By Brett Arends

Trump stands to get 36 million extra shares of Trump Media & Technology Group

Donald Trump is poised to make a huge profit from his latest venture, even as outside investors lose their shirts.

Stop me if you've heard this one before.

Shares in Trump Media & Technology Group (DJT), the parent company of Trump's Truth Social Twitter knockoff that had its initial public offering on March 26, plunged again this week. They hit a post-IPO low below $30 on Friday before rallying to around $31.

That is less than half the price for which the stock was changing hands when it first hit the market barely two weeks ago.

Outside investors are nursing losses potentially exceeding a billion dollars in total.

"We know there's currently about 30 or 40 million tradable shares," says Matthew Kennedy, a senior strategist at Renaissance Capital, a provider of IPO-focused exchange-traded funds and pre-IPO institutional research. "To my knowledge, there's no way to know how many Robinhood, Schwab, etc. accounts own the stock. [But] I suspect it's a lot of retail ownership."

Total trading volumes on the first day came to 32 million shares. If that's the scale of the mom-and-pop investors who piled into the stock, their losses to date will come to more than $1.1 billion.

What about Trump? Despite the mayhem, he's on track for a big payday.

First, there are the 79 million shares he already owns through the IPO. They effectively cost him nothing and are now worth $2.4 billion, even at today's deflated price.

But astonishingly, Trump's likely windfall also includes a massive stock bonus that he is still on track to get - even though the stock's performance so far has been disastrous.

At current prices, this bonus would be worth more than $1 billion.

It's all in the fine print of the prospectus. Trump stands to get up to 36 million extra shares as long as the "dollar volume-weighted average price" of the DJT stock exceeds certain very low thresholds during pretty much any 20-day period after the IPO.

Those threshold prices? Just $12.50, $15 and $17.50 a share.

Compare that to the actual share price, which has been as high as $79.38 and is now down to $31.

Critically, Trump will get the bonus even if the stock keeps sinking and outside investors keep losing money. His deal is based on the average price across 20 days, rather than the price at the end of the period. Even better for him: It isn't even based on a simple average, but on an average price weighted toward the days with the biggest trading volumes.

Most of those days were around the time of the IPO, when the stock price was much higher than it is now. About 30% of all the trading volume in the DJT stock to date took place on the day of the IPO, when the price ranged between $62 and $72. As a result, the dollar volume-weighted average price over the stock's first 12 days of trading remains well north of $50 - despite its recent collapse.

Thanks to this clever trick, Trump is now all but guaranteed to qualify for his bonus by the end of this month, no matter how much further the stock falls. Obviously, Trump would be better off if the stock remained elevated. The bonus is paid in shares, after all. But it gives him a big fat cushion either way.

Some people may be surprised to hear that someone can get a massive stock-related bonus as a reward for their stock's performance even as the stock collapses and outside investors get hosed.

If so, they probably haven't done business before with Trump. Many of them now have.

Don't say we didn't warn you.

And warn you.

And warn you.

Even at the current stock price, Trump's bonus would be worth $1.1 billion. As it happens, that is almost exactly the same amount of money that ordinary retail investors have lost on the stock since the company went public.

As lawyers like to say, res ipsa loquitur. That is, the thing speaks for itself.

-Brett Arends

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04-12-24 1228ET

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