The Trump Media and Technology Group is set up to protect rich investors—while endangering the little guys.
venture, which is aiming to launch a Twitter rival, made several big announcements this month. First, the business said it struck agreements to raise $1 billion of cash. Second, it admitted that it was under investigation by the Securities and Exchange Commission. Third, it revealed that Devin Nunes, a loyal Trump ally in the House of Representatives, would be leaving Congress to become its chief executive.
Nonetheless, they’re snapping up shares, with an enthusiasm that seems to be driven as much by political passion as it is by financial analysis. “This isn’t just a SPAC,” one investor declared on Twitter. “This is to take back our freedom of speech. If there’s ever a chance for a group to beat the shorts, it will be the Patriots that do it.”arly this month,
Retail investors cheered the news, boosting shares of the SPAC—and therefore the implied value of the whole venture. Before the announcement, the SPAC stakeholders were sitting on an estimated $1.9 billion of equity. Now, that’s up to $2.1 billion, a $240 million increase. Upon completion of the merger, the owners of the Trump Media and Technology Group are set to receive an estimated 86 million shares, which once looked like they would be worth $3.9 billion but now appear to be up to $4.
Here’s how it works. Initially, the whales will receive the equivalent of 29.8 million shares. But if the value of the stock goes down, the number of shares they receive will actually go up. The movements happen in tandem, so that as long as the stock price remains between about $16.67 and $56, the whales will receive $1.67 billion of stock. Since they only invested $1 billion of cash, that means they should make about a 67% return on their money.
Same with the people who organized this charade. The man that helped set up the SPAC, Patrick Orlando, controls a firm that invested $11 million into the venture and received the right to 6.6 million shares. The latest agreement would theoretically put those shares in danger, just like the ones belonging to retail traders.
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