Trump’s DJT stock creates a unique new ethical nightmare

(CNN) — The newly public company trading on the Nasdaq with the ticker “DJT” has one dominant shareholder: Donald John Trump, the cash-strapped former president of the United States.

That a fledgling, unprofitable social media platform can make the former president billions of dollars on paper is a marvel of the stock market. Trump can’t realize the windfall by selling his shares or borrowing against them for six months unless the company’s board, which is packed with his supporters, gives him the OK.

It probably can’t get Trump cash soon enough to make the drastically reduced $175 million bond he needs to post for the civil tax fraud charges levied on him and his other companies. Other penalties in that civil fraud decision, including the suspension of Trump’s ability to do business in New York, have been paused for now.

The fact that Trump’s newly public company makes little in the way of revenue and loses money should be fair warning to investors. In the meantime, he’s also trying to sell “God Bless the USA” Bibles via his social media platform Truth Social for $59.99.

Unprofitable and losing users

CNN’s Matt Egan points out that the fundamentals of the company are not exactly stellar: “Trump Media generated just $3.4 million of revenue through the first nine months of last year, according to filings. The company lost $49 million over that span.”

“My podcast makes a lot more money,” the tech journalist and CNN contributor Kara Swisher told Laura Coates on CNN on Monday.

Plus, the company’s main asset, Truth Social, has fewer than 500,000 monthly active users, far less than platforms like Facebook, X or TikTok, and Truth Social is losing more users than larger platforms and is losing users at a faster clip.

More from Egan: “For context, Reddit was only valued at $6.4 billion at its IPO last week – even though it generated 160 times more revenue than Trump Media. (Reddit hauled in $804 million in revenue in 2023, compared with Trump Media’s annualized revenue of about $5 million.)”

Who is invested?

In the case of Trump, the stock could be inflated by his supporters, although the inverse could also true. If Trump unloaded his stock, it could plunge in value because his brand would no longer be associated with it.

The top institutional investor in the company is Susquehanna International Group. Its founder, Jeff Yass, is a major donor to Republican causes and also a major investor in ByteDance, the parent company of TikTok.

Yass and Trump actually met recently, just before Trump reversed his previous position in favor of requiring ByteDance to spin off TikTok. Trump said the subject of TikTok did not come up in his conversation with Yass. Susquehanna International Group did not return a request for comment about the company’s stake in Trump Media & Technology Group.

Jordan Libowitz is the communications director for the watchdog group Citizens for Responsibility and Ethics in Washington, and in a phone conversation, he wondered what might happen if foreign wealth funds that have interests in the US, like those associated with Saudi Arabia or Qatar, started buying large amounts of DJT stock.

Since so much of Trump’s wealth is now tied up in the company, those countries could theoretically have a direct impact on his bottom line.

“The value isn’t really in the company,” Libowitz argued, pointing to the company’s lackluster revenue. “It’s in the Trump name.”

Clear ethical issues

If Trump wins the White House again and a company bearing his initials are available, it could obviously be a venue for investors to curry favor. It would be an unprecedented situation, although not dissimilar to what happened when Trump was president.

While his company was not public during his first term in the White House, the use of his then-Washington, DC, hotel by foreign companies was the subject of lawsuits related to the Constitution’s Emoluments Clause, which bars the president from profiting from a foreign government.

Days after Trump left office, the Supreme Court threw out cases related to the Emoluments Clause because he was no longer in office.

While Trump no longer owns the DC hotel, the same ethical issues would present themselves if he returns to the White House. But while the effect of throwing business to a president’s hotel ends when someone checks out of their room, the relationship with investors can be much longer lasting.

A history of bankruptcy

Another note of caution for investors in DJT should the history of the last company Trump took public.

Trump’s casino company also went by the ticker DJT, but on the New York Stock Exchange between 1995 and 2004, when it went bankrupt and was delisted. That was actually the third of Trump’s four business bankruptcies.

Note: When Trump was talking about the IPO for Trump Media & Technology Group after a court appearance in New York on Monday, he tried to explain why the company would be listed on Nasdaq instead of the NYSE. CNN’s Daniel Dale looked into that claim – something about how the NYSE is in New York – and found Trump’s explanation to make no sense, since Nasdaq is also located in New York.

Presidents are exempt from ethics law

Current law restricts every executive branch employee except the president from having investments that conflict with their job, Kedric Payne, senior director of ethics at the Campaign Legal Center, told me in a phone conversation.

It’s something Trump exploited when he said he gave control of his company, the Trump Organization, to his sons during his four years in the White House. Ethics experts balked at the lack of controls and transparency.

“It’s new facts, but the same old problem,” Payne said, adding that the volume of money involved could be much greater with a publicly traded company.

“Any action that he takes as president could benefit that company, and he would then have the benefit of the stock price,” Payne said.

Shortly after he was elected in 2016, Trump noted that presidents are exempt from ethics laws. “The president can’t have a conflict of interest,” he told The New York Times.

When these laws were written, according to Libowitz, nobody anticipated a president’s name being attached to a large, publicly traded company. That doesn’t mean previous presidents weren’t wealthy, but unlike Trump, they walled their investments off.

He’s doing the opposite, making his wealth synonymous with his name and inviting investors.

A new ‘meme’ stock?

None of that has stopped what some experts have referred to as a bubble forming around the Trump Media & Technology Group. It is drawing comparisons to so-called “meme stocks” like GameStop and AMC, which were buoyed for a time by small individual retail investors who poured in so much money that the stocks rapidly outran the companies’ fundamentals.

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