DONALD TRUMP EXPECTED TO CLINCH STOCK BONUS WORTH $1.3 BILLION FROM TRUMP MEDIA

With the firm that runs his social networking platform Truth Social seeing a sharp increase in its shares, Donald Trump is expected to get a $1.3 billion stock bonus on Tuesday, which is almost half of the majority interest he currently has in the company.

With this award, the former US President will own a $4.1 billion total share in Trump Media & Technology Group (TMTG).

Despite his commitment to hold onto all of his TMTG shares until September, Trump's wealth—which Forbes estimates to be at $4.7 billion—has increased significantly as a result of the windfall.

In contrast to a large portion of his real estate holdings, shares are easily sold on the stock market and may prove beneficial if Trump's legal costs and penalties mount, including a judgement of $454.2 million in a civil fraud case he is now fighting from New York.

The incentive also takes into account the wild trading in TMTG's shares, which have seen volatility since the business went public on Nasdaq last month after merging with a special purpose acquisition company (SPAC) and being snatched up by speculators and Trump fans.

According to the rules of the SPAC arrangement, Trump will be eligible for the stock incentive if TMTG's shares remain above $17.50 for 20 trading days after the company's IPO on March 26. They ended trading on Monday at $35.50, and they would have to lose more than half their value on Tuesday for Trump to miss out.

TMTG's current valuation of approximately $5 billion is equivalent to about 1,220 times the loss-making company's revenue in 2023 of $4.1 million.

No other U.S. company of similar market capitalization has such a high valuation multiple, LSEG data shows. This is despite TMTG warning investors in regulatory filings that its operational losses raise "substantial doubt" about its ability to remain in business.

A TMTG spokesperson declined to comment on the stock award to Trump. "With more than $200 million in the bank and zero debt, Trump Media is fulfilling all its obligations related to the merger and rapidly moving forward with its business plan," the spokesperson said.

While Trump's windfall is rich for a small, loss-making company like TMTG, the earnout structure that allows it is common. According to a report from law firm Freshfields Bruckhaus Deringer, stock earnouts for management were seen in more than half the SPAC mergers completed in 2022.

However, few executives clinch these earnout bonuses because many SPAC deals end up performing poorly in the stock market, said Freshfields securities lawyer Michael Levitt. TMTG's case is rare because its shares are trading decoupled from its business prospects.

"Many earnouts in SPACs are never satisfied because many SPAC prices fall significantly after the merger is completed," Levitt said.

To be sure, TMTG made it easier for Trump to meet the earnout threshold. When TMTG agreed to merge with the SPAC in October 2021, the deal envisioned that TMTG shares had to trade above $30 for Trump to get the full earnout bonus. The two sides amended the deal in August 2023 to lower that threshold to $17.50, regulatory filings show.

Had that not happened, Trump would not have yet earned the full bonus because TMTG's shares traded below $30 last week. The terms of the deal, however, give Trump three years from the listing to win the full earnout, so he could have still earned it if the shares traded above the threshold for 20 days in any 30-day period during this time.

2024-04-24T03:16:45Z dg43tfdfdgfd