Trump's £1.6 Billion Truth Social Fortune: Ready to Be Tapped, But Not Easily

Former US President Donald Trump has been holding onto a social media fortune he couldn't touch, but that's set to change very soon. The lock-up period preventing Trump from selling or even borrowing against his £1.8 billion stake in Truth Social owner Trump Media & Technology Group (DJT) is scheduled to expire on 25 September, according to regulatory filings.

Theoretically, this grants Trump access to a substantial sum, potentially used to cover mounting legal fees or even fund his presidential campaign. However, in practice, Trump faces significant hurdles in selling a significant portion of his stake in Trump Media - unless he's willing to risk a drastic plummet in the company's share price.

"It would be virtually impossible for Trump to liquidate his entire stake or even a third without completely tanking the stock price," Michael Ohlrogge, an associate professor of law at New York University School of Law specializing in corporate governance and financial regulation, told CNN.

The share price of Trump Media has already taken a significant hit. On Wednesday, the company's shares dropped another 4%, trading below £16 for the first time since the merger that created the company earlier this year.

Since late March, Trump Media has lost a staggering 70% of its value, a downward trend exacerbated by Vice President Kamala Harris gaining ground in polls against Trump. This decline has also significantly impacted Trump's net worth.

As recently as 9 May, Trump's dominant stake of 114.75 million shares of Trump Media was valued at £4.9 billion. However, this wealth was inaccessible due to a common lock-up period that prevents insiders from immediately selling shares.

According to regulatory filings, this restriction is set to expire for Trump on 25 September, but could be lifted earlier. The lock-up would end if Trump Media's share price hits or surpasses £10 for any 20 trading days within a 30-trading day period starting on 22 August. Assuming the stock avoids further drastic drops, this could result in the restrictions lifting as early as 20 September.

The primary obstacle Trump would face in selling a large portion of his stake is his dominant role in the company. Beyond owning a majority of shares, Trump is the most popular user on Truth Social, the company's primary platform. The company's stock symbol is even "DJT."

A rapid exit from the company could easily cause a loss of confidence in Trump Media.

"You don't see sizable shareholders like President Trump selling a lot of stock because it drives the price down," said Charles Whitehead, a professor of business law at Cornell Law School. "From the market's perspective, it may look like rats jumping off a sinking ship."

Investors would be similarly apprehensive if Elon Musk suddenly offloaded a large portion of his Tesla shares or if Mark Zuckerberg sold a significant chunk of Meta stock.

Some Trump Media insiders have already begun selling shares, perhaps contributing to the recent drop in price. For example, Phillip Juhan, Trump Media's chief financial officer and treasurer, recently disclosed selling £1.5 million worth of stock. Trump Media's general counsel Scott Glabe, chief operating officer Andrew Northwall, and chief technology officer Vladimir Novachki also made smaller sales last week.

Even Devin Nunes, the former Republican congressman now serving as Trump Media's CEO and president, sold £500,000 worth of stock last week.

In Trump's case, political considerations could also play a role.

“If Trump were to sell a large number of shares and the stock price tanks, to some degree he would be burning his own supporters who bought the stock,” said Jay Ritter, a finance professor at the University of Florida’s Warrington College of Business. “Politically, that may not play out real well for him.”

Experts also point out that Trump Media's valuation defies logic. Despite the recent sell-off, Trump Media is still valued at nearly £3.2 billion. This is difficult to justify given the company's revenue of only £660,000 in the last quarter.

“It’s grossly overvalued,” Ritter said. “It’s hard to come up with a value of the company that is much more than the cash on the balance sheet.”

Trump Media holds £270 million in cash and equivalents, funds the company intends to use for building out its streaming business.

Ohlrogge, the NYU professor, stated that the fundamentals "look even weaker" than before Trump Media went public because supporters can no longer argue the company is cash-strapped.

"The current price is way higher than can possibly be justified based on fundamentals," Ohlrogge said.

Although Trump may be unable to sell a large number of shares, there's another route to accessing his Truth Social fortune. Once the lock-up period ends, Trump will no longer be prohibited from borrowing against his stake in Trump Media.

This allows Trump to pledge some or all of his shares as collateral for a loan. However, as Ohlrogge notes, "a lot of banks are reluctant to do business with Trump due to their past interactions with him."

Even if banks are unwilling to lend to Trump, wealthy supporters could step in.

“It could be a wealthy individual who either thinks it’s good business or they see it as an opportunity to get on the good side of someone who might be the next president,” Ohlrogge said.

Experts predict that if Trump does borrow against his Truth Social stake, he may not be required to disclose it.