\n
![](\"https:\/\/fortune.com\/img-assets\/wp-content\/uploads\/2024\/04\/GettyImages-2147030861-e1713023341156.jpg?w=2048\")
<\/p>\n [ad_1]
\n<\/p>\n
A rocky start for Trump Media & Technology Group Corp. shares has wiped out $4.5 billion in market value in just a couple of weeks. But it will have to lose a lot more than that to put at risk the massive special bonus due to the former president and his corporate insiders.<\/p>\n
As part of the startup\u2019s blank-check deal, Trump Media insiders \u2014 Donald Trump himself is by far the largest holder \u2014 will divvy up 40 million new shares if the stock trades can stall their latest slide, regulatory filings show. The so-called earnouts, which can be a standard part of deals involving special purpose acquisition companies, or SPACs, are designed to reward the original investors, but they also punish ordinary shareholders by diluting the value of their stakes through the issuance of millions of extra shares.<\/p>\n
In the case of Trump Media, the stock needs to trade above $17.50 for 20 days out of a 30-day period \u2014 Friday marked its 13th session \u2014 over the next three years. With the company closing Friday at $32.59, those conditions could be met as soon as April 23, despite the stock\u2019s 59% tumble from a high of $79.38 on March 26. In fact, the shares would need to plunge another 46% for the now $1.3 billion paper payday for the former president and his co-founders to be in doubt.<\/p>\n
That said, Trump Media is\u00a0not a normal<\/a>\u00a0business or stock, so there are few sure things when it comes to its behavior in the market.<\/p>\n A representative for Trump Media didn\u2019t respond to requests for comment.<\/p>\n \u201cSo much about the stock price movements of this company are driven by non-rational factors that it\u2019s hard to make particularly firm predictions,\u201d said Michael Ohlrogge, a New York University law professor who studies SPACs.<\/p>\n Of course, the value of the additional windfall has spiraled with shares tumbling. The earnout has shed some $1.3 billion in value from a debut peak through Friday\u2019s close, with Trump\u2019s current stake losing billions on paper in a matter of weeks.\u00a0<\/p>\n The insiders are\u00a0somewhat protected<\/a>\u00a0even if the shares keep falling and drop below $17.50, because the payout slides, but doesn\u2019t disappear, as the stock hits certain levels. So, as long as Trump Media trades above $15, the group will get 30 million shares to split. And if the shares fall toward $12.50 the payout drops to 15 million shares.\u00a0<\/p>\n But the reality is trying to figure out what these stakes are worth is an ever-changing exercise because of the stock\u2019s swings, and in practical terms moot since the former president and the other insiders must wait until September before even trying to sell some of their holdings because of the SPAC deal\u2019s six-month lockup period. So while the millions of shares would deliver Trump some $1 billion in additional stock, turning that paper profit into real cash is going to take some time.\u00a0<\/p>\n The company\u2019s board \u2014 made up of\u00a0Trump Media insiders<\/a>\u00a0and members of the former president\u2019s administration \u2014 could expedite that lockup to open the door for him to start capitalizing on his current stake of 78.75 million shares. But before that happened US regulators would have to finalize some filings, and even if they did, selling any stock in the company wouldn\u2019t be as simple as cashing a lottery ticket.<\/p>\n \u201cIt\u2019s extremely unlikely that he\u2019d be able to liquidate any substantial portion of his holdings without seriously tanking the stock price,\u201d NYU\u2019s Ohlrogge said. However, he added that if Trump sold shares at a fraction of \u201ctheir current market price he\u2019d still do exceptionally well in the deal overall.\u201d<\/p>\n The actual value of Trump Media has been hotly debated given it lost more than $55 million last year while bringing just $4.1 million in revenue. As of Friday\u2019s close, it was worth roughly $4.5 billion after shedding nearly half its value in less than a month.<\/p>\n The shares have become an expensive way for speculators to treat the stock market as a casino, raising memories of 2021\u2019s meme stock mania.\u00a0<\/p>\n Still, the big focus for investors is how quickly Trump can take advantage of his paper wealth and what that will do to the stock.\u00a0<\/p>\n Trump is embroiled in a lawsuit with two Trump Media co-founders who claim he tried to dilute their stakes. A Delaware judge granted their request to amend the suit to include allegations that Trump retaliated against them by locking up their shares for six months, which they claim will cause \u201cirreparable harm\u201d to their finances. Trump himself is subject to the same restrictions.<\/p>\n Meanwhile, Trump is due to start his first criminal trial on Monday in Manhattan, where he\u2019s accused of falsifying business records to hide a hush-money payment to a porn star before the 2016 election. It\u2019s one of four criminal prosecutions Trump is facing as he campaigns to return to the White House.<\/p>\n<\/div>\nValue Spirals<\/h3>\n
Liquidation Risk<\/h3>\n
Subscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. Sign up<\/a> for free.<\/div>\n