Editorials & Other Articles

Yo_Mama_Been_Loggin

(108,192 posts) Wed Apr 3, 2024, 01:48 PM Apr 3

MAGA suckers are about to lose a lot of money thanks to Truth Social

Like everything else related to Donald Trump, his social media platform Truth Social’s parent company, Trump Media & Technology Group, has been embroiled in a nasty stew of incompetence, greed, and legal warfare. And much of that came to a head Monday as the company lost almost 21.5% of its inflated valuation after its much-hyped initial public offering, or IPO.

Despite the one-day collapse, the stock is still grossly overpriced, and a close examination of TMTG’s 8-K filing with the Securities and Exchange Commission shows just how much of a disaster it is—and how much further the stock could plunge. Let’s take a walk through the document.

Trump holds 57.3% of the company, valued at $8.84 billion as I write this. That means his stake is worth $5 billion. But … that’s just Monopoly money. If he tried to sell, the mass flooding of his shares into a market uninterested in hoovering them up would collapse the price. If he tried to sell, his eventual take would be substantial, but we don’t know what his holdings are really worth. At the moment, he’s forbidden from selling his TMTG shares for six months, though the company’s board (which he controls—more details below) could waive that provision. If they did, it would immediately collapse the share price. If they don’t and Trump has to wait, expect the price to fall in fits and starts over the coming months, because the rest of the 8-K had nothing but horrendous news for the company. As a fun aside, Trump lost around $1.2 billion in paper value today.

Since Trump owns more than 50%, the filing notes that “a company of which more than 50% of the voting power for the election of directors is held by an individual, group or other company is a ‘controlled company’ and may elect not to comply with certain corporate governance standards.” The filing helpfully explains what this means: “Accordingly, investors may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.” Who wants to invest in a company that has fewer stockholder protections, and is owned by Trump? Oh, and seated on that not-independent board? Donald Trump Jr. and Linda McMahon, who ran for Senate in Connecticut twice (and lost).

https://www.dailykos.com/stories/2024/4/2/2232840/-MAGA-suckers-are-about-to-lose-a-lot-of-money-thanks-to-Truth-Social

6 replies

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MAGA suckers are about to lose a lot of money thanks to Truth Social (Original Post) Yo_Mama_Been_Loggin Apr 3 OP

Meme stocks rely on the greater fool theory LetMyPeopleVote Apr 3 #1

Well said. SWBTATTReg Apr 3 #3

A good number of TFG supporters will be stuck with worthless stock LetMyPeopleVote Apr 3 #4

You're right. I've seen in the stock market where unwelcomed news has destroyed a stock, and those that were SWBTATTReg Apr 3 #5

Danger, danger, danger! SWBTATTReg Apr 3 #2

Delaware Judge was reportedly "gobsmacked" at learning of the former president pursuing separate litigatation LetMyPeopleVote Apr 4 #6

LetMyPeopleVote

(145,554 posts)

1. Meme stocks rely on the greater fool theory

Reply to Yo_Mama_Been_Loggin (Original post)

Wed Apr 3, 2024, 02:00 PM

Apr 3

Meme stocks rely on the greater fool theory. I was amused to see that DWAC/Trump Media is classified as a meme stock where the value is due to personality and not due to the real value of issuer of the meme stock. This article is a good discussion of the meme nature of DWAC/TMT.
https://www.vanityfair.com/news/donald-trump-truth-social-media-merger

Trump’s financial future now hinges on some of the strangest fads in corporate finance—meme stocks, SPAC deals, and cult-of-personality investing. If Trump can find a way to act fast, it might just be the bailout he desperately needs.

Truth Social is a bad imitation of Twitter, where Trump was an unavoidable presence long before he ran for president. It’s chock full of stale red-pilled memes, MAGA conspiracy theories, and of course, Trump. That’s the main draw. Truth Social is the only place the former president now regularly posts his unfettered thoughts......

DWAC is best thought of as a meme stock. You may remember the meme stock fad from when retail investors on Reddit successfully coordinated a short squeeze with GameStop stock, before glomming onto a series of other millennial nostalgia brands like AMC Entertainment, BlackBerry, and Bed Bath & Beyond. Meme stocks are often publicly traded companies that attract an inordinate percentage of individual investors and their stock performance fluctuates in a way that’s significantly divorced from the reality of their underlying business. Combine those two trends and you’ll start to see why Trump’s media company could be valued at roughly $9 billion if it merges with DWAC.

Jay Ritter, a finance professor at the University of Florida, says meme stocks often depend on the “greater fool theory of investing,” meaning rational investors might buy in expecting the stock price to rise and betting that they can sell their shares to a greater fool willing to buy them at a higher price. In this case, however, Ritter speculates there is an inordinate number of individual retail investors compared to institutional investors, such as hedge funds, that normally own SPAC shares prior to a merger. “Here you’ve got ideology involved [too]—as far as I can tell, the vast majority of DWAC investors are Trump political investors, and they’re to some degree putting their money where their mouth is… My suspicion is most of them have bought the stock as a show of political support.” In this way, Trump is conducting yet another public fundraising from his supporters—this time through the public markets.

Idiots who purchase meme stocks are betting that they can get out before the other idiots figure out that the stock is worthless

SWBTATTReg

(22,166 posts)

3. Well said.

Reply to LetMyPeopleVote (Reply #1)

Wed Apr 3, 2024, 02:03 PM

Apr 3

Idiots who purchase meme stocks are betting that they can get out before the other idiots figure out that the stock is worthless

LetMyPeopleVote

(145,554 posts)

4. A good number of TFG supporters will be stuck with worthless stock

Reply to SWBTATTReg (Reply #3)

Wed Apr 3, 2024, 02:11 PM

Apr 3

SWBTATTReg

(22,166 posts)

5. You're right. I've seen in the stock market where unwelcomed news has destroyed a stock, and those that were

Reply to LetMyPeopleVote (Reply #4)

Wed Apr 3, 2024, 02:19 PM

Apr 3

lucky enough to get out in time, probably only a tiny percentage or so, under 5%, saved their bacon. They were also the ones that were looked at closely by the SEC if they had received the bad news prior to other investors getting the news, and sold the stock off, based upon this illegally obtained news ahead of other investors. I kind think that tRUMP is in this category, that his helpers would tell him in advance of some really bad news and he gets to bail out prior to the other unlucky stiffs that bought the stock. This sounds exactly like tRUMP's MO.

SWBTATTReg

(22,166 posts)

2. Danger, danger, danger!

Reply to Yo_Mama_Been_Loggin (Original post)

Wed Apr 3, 2024, 02:02 PM

Apr 3

Fortunately, this is only going to negatively and massively impact tRUMP fans and the unfortunates that allowed tRUMP into the sharing/partnership agreements on this stock. For me, being so lopsided in ownership stakes (over 50% via one owner), and also being so unstable in mentality (tRUMP) etc., this is a waking disaster area for any investor. IMHO, they knew this already, these fellow investors.

So, they actually deserve everything that is happening to them, and will happen to them in the near future, when the stock continues to tumble. tRUMP has shown he's already toxic in the business environment, and the fact that some investors allowed him into the picture so significantly still shocks me. How in the world / or why in the world, would you partner with someone who's had a long history of destroying his businesses?

LetMyPeopleVote

(145,554 posts)

6. Delaware Judge was reportedly "gobsmacked" at learning of the former president pursuing separate litigatation

Reply to Yo_Mama_Been_Loggin (Original post)

Thu Apr 4, 2024, 10:35 AM

Apr 4

TFG had been sued in Delaware earlier by Litinsky and Moss and so any claims that TFG had against these two persons needed to be litigated in Delaware. TFG's claims are compulsory counterclaims and TFG should be sanctioned for filing a separate lawsuit in Florida

Link to tweet

https://www.alternet.org/trump-sues-business-partners/

Trump's lawsuit in Florida comes after Litinsky and Moss filed their own lawsuit against the former president in Delaware Chancery Court in February. The two investors accused Trump of orchestrating a scheme to "drastically dilute" the value of TMTG's shares in what they referred to as "11th hour, pre-merger corporate maneuvering." While Trump initially had control of 90% of the company and had 78 million shares in the company, his business partners alleged that he tried to inflate the number of shares to one billion, which would have reduced their stake to less than 1% of the company.

"[Litinsky and Moss' company was] promised 8.6 percent of this company and sadly its business partners are baselessly trying to renege," attorney, Christopher J. Clark told the Washington Post in February. "They feel like: We made Truth Social for you. You get 90 percent. But some people just aren’t happy with 90 percent."

Trump's business partners alleged that the former president's schemed to artificially create new shares to possibly then give to himself and his family members. Prior to going public last week, the SPAC that facilitated TMTG's merger told the Securities and Exchange Commission that the pending litigation could "negatively impact investor confidence and market perception."

According to Bloomberg, the fact that Trump filed a lawsuit in Florida rather than countersuing Litinsky and Moss in Delaware angered chancery court Judge Sam Glasscock III, who may sanction Trump over the suit. Glasscock was reportedly "gobsmacked" at learning of the former president pursuing separate litigation outside of his courtroom.

TFG believes that normal rules do not apply to him. This Delaware Chancery Court Judge will teach TFG lesson.

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