Donald Trump is richer than ever (at least on paper)

Donald Trump began the week fearing that Trump Tower, the golden banner of his real estate empire, would be seized after failing to raise enough liquidity to pay a court bond. He finishes her as one of the 350 richest men in the world, with a fortune valued at almost 7.5 billion dollars (about 7 billion euros), according to the Bloomberg Billionaires Index. Trump has never been as rich as he is now.

At the same time, his fortunes had never been so uncertain and volatile. Most of his wealth—concentrated in shares of his social network, Truth—cannot be cashed in and there is a risk that it will evaporate as quickly as it has been forged, before he can take advantage of it.

To the delirium of Trumpists, the wealth that - at least on paper - the former president has achieved is combined with the irony that it is a consequence of the veto he suffered on social networks for inciting violence on the eve of the assault on the Capitol. He was suspended from both Facebook and Twitter in January 2021. He made a failed attempt in May of that year to launch his messages through a website, which he dubbed From

the Desk of Donald J. Trump

. Then he embraced a plan put forward by two former contributors to his TV show

The Apprentice

to create a Twitter replica.

With this, Truth Social was born, whose stock market valuation is economically absurd. It defies logic. The turnover of TMTG, the company that owns the network, between January and September 2023 was only $3.4 million, while its losses were $49 million. The company has historically incurred operating losses and negative cash flows and expects to continue doing so in the foreseeable future, as admitted in the placement prospectus. However, it is worth 8.4 billion dollars on the stock market (and up to 12.7 billion if the shares pending issuance are taken into account in the calculation).

Trump is by far the largest shareholder, with approximately 58% of the capital. The former president officially declared his participation in the company this Thursday before the United States Securities and Exchange Commission (the SEC). In his notification, Trump communicates that he is the direct owner of 78.75 million shares. These titles closed the last session at $61.96 per share, so his share package is valued at $4,879 million. But not only that: the former president also notified that he has the right to receive another 36 million shares as a prize if certain milestones are met with the listing that are on track to be met, so in a matter of weeks, Trump could achieve those 36 million shares. additional, valued at market price at another 2.23 billion dollars.

There is a big asterisk to put on that wealth. In the operation, Trump has signed a commitment not to sell the shares for a period of six months that began on Tuesday. The council, in the hands of people close to the former president, could authorize him to sell sooner, but the mere announcement could cause a collapse, as could the release of abundant paper to the market. In six months, one and a half before the presidential elections, no one knows what price the company will be trading at or at what price it could sell part of its shares.

Trump is also the star of his social network, where he has 6.9 million followers (compared to the 87 million he maintains on X, where he is inactive). The company's president and main shareholder has an agreement to give Truth priority in his social media posts.

TMTG is worth more than The New York Times Company, which achieved revenue of $2,426 million in 2023 and a profit of $232 million. Trump's social network defies any metric. It is trading at more than 1,500 times his income. Nvidia, the star value of the Stock Market thanks to artificial intelligence, is trading at 38 times its turnover. Facebook went public with a valuation of about 12.5 times its revenue when it was in full growth spurt.

If what is compared are the users, the nonsense is repeated. The social network was launched in the first quarter of 2022 and in the IPO prospectus, registered last month, the company maintains that it has achieved “an approximate total of 8.9 million registrations on Truth Social through iOS , Android and the web.” Ignoring the fact that not all registrations involve active users, Truth Social's valuation is over $900 per registered user, compared to Reddit's $147 per active user, X's $80, and Snapchat's $46 , according to Reuters data.

A meme value

Although this price does not withstand an economic analysis, the truth is that the price is sustained for days with a considerable trading volume on the stock market, so no one dares to guess what will happen to the price in the short term. It is a title that is moved by irrational impulses, often transmitted by social networks themselves. For months, the price of GameStop, which survives deflated, defied economic fundamentals, but so did other stocks such as AMC or Bed, Bath & Beyond, which ended up in bankruptcy, ruining their shareholders. These securities were dubbed meme securities and Trump's company is the latest addition to the group.

In the case of Truth Social, the fact that Trump is the Republican presidential candidate—and a provisional favorite in the polls—adds spice to the menu. “Trump investors may be betting that he will win the election in November and use Truth Social as a mouthpiece for the White House, attracting more users and advertisers to the platform. “It is not a crazy bet, since polls show that Trump surpasses President Biden,” maintained the

Wall Street Journal,

the Bible of American finance.

The publishing company of the social network, called Trump Media & Technology Group (TMTG), merged with a company that basically consisted of a bearer check for $300 million. It was Digital World Acquisition Corp (DWAC), a Spac, that is, a company created specifically to undertake a merger or acquisition. After years of obstacles and setbacks, the United States Securities and Exchange Commission (SEC) approved the transaction's prospectus in February. The DWAC board approved the merger last Friday and it became effective on Monday, when the company adopted its new name and the registration was carried out.

Although it was already listed as a merged company on Monday, conventionally the stock market premiere honors were reserved for Tuesday, when the trading code for the company's shares became DJT, the initials of the former president. Trump Hotels and Casino Resorts, which went public in 1995, already used that same code. In 2004 it declared bankruptcy and was excluded from the market, but that is another story.

With each step, the share price has skyrocketed. DWAC/DJT shares have appreciated 374% in the last 12 months; 302% in six months, and 255% so far this year. According to the opinion of Dan Coatsworth, investment analyst at AJ Bell, reported by Reuters, “today's price and valuation do not correspond at all to the underlying business and its prospects.”

“TMTG aspires to build a media and technological powerhouse that rivals the progressive media consortium,” says the IPO brochure. “TMTG was founded to fight big tech companies—Meta (Facebook, Instagram and Threads), United States and censor voices that contradict its

woke ideology,”

he adds, using a derogatory tone for progressive ideas.

The company recognizes that it needs to attract Republican voters to its network to be viable and admits that if Trump loses popularity or new controversies arise that damage its credibility or people's desire to use a platform associated with him, the results of operations They will resent it.

“The future success of TMTG will depend, to a large extent, on the continued presence and popularity of President Trump,” the warnings section highlights. “If President Trump were to terminate his relationship with TMTG due to death, disability, criminal conviction, incarceration or any other reason, or limit his involvement (…) due to his current candidacy for political office,” the company “would be significantly affected by harmed,” he warns.

The document also reviews some of Trump's business precedents, including the bankruptcy of several of his companies ("there is no guarantee that TMTG will not also go bankrupt," he says) and other past scandals.

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