(Bloomberg) — The value of Donald Trump’s stake in his media startup may have shrunk since he went public via blank check, but it’s still worth a lot on paper. The question for the former president is: if he decides to sell, how much he could actually get out of it.
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At its peak last month, Trump’s 58% stake in Trump Media & Technology Group Corp. worth a whopping $6.3 billion. Trump and other insiders can’t sell because of a six-month lock-up agreement. That didn’t stop other shareholders, who enjoyed a 270% rally, from cashing out. After the deal, the shares lost roughly two-thirds of their value within weeks.
Such a plunge is not unheard of for companies that use special purpose acquisition companies to go public. More than a fifth of de-SPACs, those making such deals, that have debuted since 2019 are trading below $1 each, data compiled by Bloomberg shows. Most SPACs go public at a price of $10 per share.
Trump has given no public indication that he plans to sell, but if he does, he could look to the example of the insiders who profited handsomely from some of the hottest SPAC deals at the height of the boom. The former president could still pocket hundreds of millions — not a bad return for a company that generated just $4.1 million in revenue last year.
Trump Media, in response to a request for comment on Donald Trump’s path to cashing out of the company, said reporting on it would be “completely baseless” and partisan, “without any conceivable sign that he plans to do so.” ”
Read more: Trump Media’s $5.3B selloff deepens as 270% rally worsens
Billionaires in short
The founders of biotech company Ginkgo Bioworks Holdings Inc. were briefly billionaires in late 2021 after their company went public in a SPAC deal that sent its shares soaring to a $29 billion valuation in its first months as a public company. But by the time they started selling in late 2022, the company’s stock price had fallen from a high of $14.92 to just over $3.
Yet three of the founders – Jason Kelly, Barry Canton and Reshma Shetty – steadily sold their shares, liquidating between 20% and 30% of their original shares over the next eighteen months. Although the sales averaged about $2 per share, this was enough to generate more than $125 million in proceeds.
Representatives for Ginkgo Bioworks, where all three are still executives, did not immediately respond to requests for comment.
A similar 80% decline for Trump Media would still indicate a revenue of around $1 billion for the former president. That’s more than twice as much as his most valuable real estate holdings and would cover the money he owes under recent legal rulings.
Selling isn’t the only way founders can obtain liquidity. When mortgage lender UWM Holdings Corp. went public in a SPAC merger in January 2021, Chief Executive Officer Mat Ishbia owned a stake worth more than $11 billion. About 20 months later, shares were down 75% from their highs.
Instead of selling shares and increasing the pressure, Ishbia arranged a loan using his stake as collateral. He pledged more than half of the company’s stock, worth about $4.6 billion, days before buying the Phoenix Suns basketball team for a record $4 billion last February, when UWM was under 5 dollars per share.
A representative for UWM and Ishbia did not immediately respond to requests for comment.
Of course, not all founders benefit from their SPAC deals. Take John Ruiz, founder of the insurance recovery company MSP Recovery Inc. The company went public at a valuation of $32.6 billion, giving Ruiz a paper fortune – in short – of $21 billion. Nearly two years later, Ruiz has not sold any of his shares and the company is valued at about $120 million. Ruiz even loaned the company money to stay afloat.
A representative for Ruiz and MSP did not immediately respond to requests for comment.
Trump media insiders
Any attempt to free Trump Media insiders from the six-month lock-up agreement that prevents them from selling would be potentially fraught. While the newly listed company’s board could waive the sales restrictions, the optics would likely signal to investors that a rush of sales is coming, as well as open them up to potential shareholder lawsuits.
Trump is embroiled in a lawsuit with two co-founders who claim he tried to dilute their stake. A Delaware judge has granted a request to amend the lawsuit and accuse Trump of retaliating by holding onto their shares for six months, which they say will cause “irreparable damage” to their finances. Trump is subject to the same lock-up.
The roughly 70% drop from a debut peak has cost the pair about $415 million on paper. For Trump, his paper returns are up by some $4.4 billion — and that’s not counting the additional windfall he and other Trump Media insiders stand to reap.
The company announced on Tuesday that it has completed the research phase of its new live TV streaming platform, according to a press release. It plans to offer Truth Social over-the-top streaming apps that are expected to host news, religious and family-friendly content.
Trump also faces four criminal charges as he campaigns to return to the White House. The first criminal trial began Monday in Manhattan, where he is accused of falsifying company records to conceal a hush money payment to a porn star before the 2016 election. He described the case as an outrage and a persecution.
Read more: Trump trial starts slowly, ex-president seems bored
As part of the SPAC deal, Trump Media insiders will receive an additional 40 million shares, as long as the stock remains above $17.50 for six more trading days. It was trading around $23 per share on Tuesday.
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