The financial sharks made out like bandits after the biggest shark, Donald Trump, spun air into gold. He created a media company, Trump Media and Technology Group, with no operation and no cash. Then, he sat back and watched cash fall into his lap as shares blew up to 550 percent in one week
The company looks like “a hackable Twitter prototype,” according to The Forbes Magazine.
Some investors are getting richer, but:
‘Not everyone is going to make money.’
On Friday stocks were $175 a share. The investor behind the company all of a sudden owned $1 billion’s worth of stock. If the hedge funds got in early, they owned “hundreds of millions in gains.” Of course, they could have already taken their win and jumped off of the Trump wagon.
Professor at the New York University School of Law Michael Ohlrogge studies SPACs. He said SPACs were “offering flimsy financials.” Even so, Trump’s deal stood out:
‘You couldn’t do a traditional IPO. I don’t think you’d be able to find any investment bank who would have done this.’
Another investor, Boaz Weinstein, told The New York Times he dumped his unrestricted shares controlled by his Saba Capital, calling it “a righteous divestment.” He said in his statement:
‘Many investors are grappling with hard questions about how to incorporate their values into their work. For us, this was not a close call.’
Friday, people were trading $175 for a $7.62 share of Digital World AcquisitionShares. It closed Wednesday at $64.89 a share. As Forbes said:
‘If this seems absurd, that’s because it is.’
A Business and Law professor at Stanford, Michael Klausner said:
‘Combine Trump with SPAC, and that’s what you get. It’s like more hot air than either started with in the first place.’
- How SPACs work:
Patrick Orlando, not Trump, sponsored his SPAC. Orlando paid $25,000 for what would eventually be 8.6 million shares of a SPAC, Digital World Acquisition Corporation.
2. Digital World Acquisition had no assets and no operations. But it brought together a rather small team:
- Chief Financial Officer (CFO) Luis Orleans-Braganza, a member of Brazil’s National Congress. That earned the CFO 10,000 shares of Orlando.
- Benchmark Investments came in to raise “a big pile of cash [$290 million] from investors by taking a shell company public.”
- They merged that company with a private firm and by doing so became able to trade publicly. Two underwriters were paid $10 million and 144,000 shares.
4. Orlando went after big investors for credibility, guaranteeing $10 per 2.1 million Digital World Acquisition units. And they would make $10.20 or $415,000 profit. It gave them 150,000 shares at cost. D. E. Shaw and 11 others signed up, two.
5. Digital World Acquisition launched the public offering. It still had no “operations nor revenue.” They sold out, and Digital World Acquisition brought in “a $290 million pile of cash.
6. It invested in The Trump Media and Technology Group, which was still basically “little more than a hackable Twitter prototype.” Yet, it listed its competitors as “Twitter, Facebook, Netflix, the Walt Disney Co., CNN, iHeartMedia, Amazon, Google, and Stripe.” The presentation included zero financial information.
8. Regular investors aka “the suckers” bought stock in the SPAC Digital World Acquisition. Trump Media and Technology Group was “not for sale,” because it is still privately owned.
9. October 20, shares of Digital World Acquisition closed at $9.96 redeemable at $10, so it looked like “a no-lose proposition.” Thursday it opened at $12.73 with buyers wanting to invest in Trump’s ethereal company:
‘Digital World Acquisition is now little more than a pile of cash—and a diluted one, at that…those who fall for their sales pitch get screwed.’
10 Early investment firms making out like bandits.
- ‘Orlando had 6.6 million shares last month for about $11 million, now worth an estimated $450 million.
- Six of them disclosed holding investments last month that probably cost them less than $25 million apiece. By the end of the day Friday, those blocks were worth more like $250 million.
- Representative Marjorie Taylor Greene and other Trump fans bought stock.
- Lots of Wall Street money cashed out.
- D. E. Shaw, Lighthouse Investment Partners, and ATW SPAC Management dumped their unrestricted shares.
- Orlando has around 6.6 million shares at $11 million, now worth about $450 million.’
11. As “Chairman,” “Company Principal,” and possibly “majority stockholder” Trump owns “a significant percentage of his private company, the Trump Media and Technology Group.” It was worth $875 million initially. Now, the estimated value is $5.6 billion and possibly $2.6 billion more, resulting in $8.1 billion of stock. With other stocks and options, it is valued at $11 billion.
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