Serial sex abuser Donald Trump (SSAT) has had his Truth Social company go public by merging with a publicly traded shell company Digital World Acquisition Corp. Under the deal SSAT owns nearly 79 million shares, about 58% of the total. While the share price peaked at $79.38 on March 22, making his shares worth about $6.3 billion, it has since dropped precipitously, and as of yesterday was trading at $33, making its worth about $2.6 billion.

David Cay Johnson writes that the true value of the stock in Trump’s company is zero since it lost $58 million last year and had revenues of just $4 million with no sign that revenues will rise. Johnson says that because the stock is highly over valued, it is the target of so-called ‘short sellers’, who make money by betting correctly that a stock’s price is going to fall.

Hence you would expect SSAT to cash out immediately before the stock completely tanks but he cannot do that for six months due to a ‘lock up’ provision that was part of the merger deal to prevent insiders from quickly selling their stock and harming other investors, unless the board approves changing that rule. Now the company has decided to issue 21.4 million more shares. While this waters down the value of the stock, it does enable the company to get about $247 million in revenue, money it needs since the company’s earnings are so low as to be almost non-existent..

But Johnson says that SSAT still stands to make quite a lot of money by various schemes. The way this works is complicated but Johnson lays it out pretty clearly and it shows how rich people can manipulate the stock market to come out on top, leaving small investors holding the bag.

He starts by explaining what short-selling is.

Shorts borrow shares from investors and sell them, paying a fee to the investor. If the stock price falls, the shorts buy back the same number of shares at the lower price, return them to the person they were borrowed from, and keep the difference in price between the sale and re-purchase.

People who hold shares are called longs. They have a long, or ownership position.

Where do the short sellers get the shares to borrow? The brokers who hold the shares for investors lend them out and then get them back later so that the investor is made whole. If the shares are being held in a brokerage account, the investor may not even know that their shares are moving around like this. Apparently all the original shares in the Truth Social company have been borrowed like this by short sellers, leaving no more to borrow. So while issuing new stock brings in some additional revenue from the MAGA mugs who buy them, it has the downside that the new shares provides more opportunities to short sellers to borrow, which can further drive down the price.

In an effort to prevent short selling of this new stock issue, Trump Media has issued an advisory to its investors telling them how to stop their shares from being borrowed by short sellers.

The short-selling-prevention tips posted Wednesday on Trump Media’s website come as its DJT stock has fallen sharply in price since it began being public trading on March 26 — and as short sellers have taken a keen interest in the owner of the Truth Social app despite relatively high fees to finance such trades.

“It certainly shows concern” about short selling of Trump Media stock, said Kevin Murphy, a business professor at the University of Southern California who is an expert on executive compensation.

“I haven’t seen it before,” Murphy said when asked how common it is for companies to give shareholders instructions on how to thwart short sellers.

“Managers who … think the stock is undervalued aren’t going to be overly concerned about short sellers,” he said.

Even though SSAT cannot sell his shares for six months, Johnson says he can still get money.

Donald can pledge his DJT shares to an investment bank. The bank then loans Donald cash secured by those shares.

CEOs have done this for decades, pocketing cash without selling their shares — or having to tell investors! In those deals, the CEO or founder could borrow as much as 90% of the share value. If the stock rose, the investment house got the first 35% or so of the increase. If the stock fell, as we see with DJT shares, the investment house also makes money because it shorts the stock.

After the price collapses, the investment bank closes its short position by buying back cheap shares, and Trump’s loan is paid off.

The bankers keep the fat fees charged for arranging the deal plus any surplus on the short.

In this case, the investment bank might loan Trump only half of the value of his shares. In that scenario, it would double its money because when the bank closes its short position, its gross profit would be twice as much money as it loaned Trump. And then there are the fees the bank collects for arranging the deal.

It’s a win-win for Trump and the bank — and nothing but losses for people who went long, buying and holding DJT shares as they fell from almost $80 to zero.

As Johnson sums up:


Whether it’s cheating at golf, cheating novice roulette players at the Trump Castle casino, cheating illegal immigrants out of their wages in building Trump Tower, cheating on his wives, cheating insurance companies, cheating on damages from 9/11 — he suffered none but collected big time — cheating on his income taxes, cheating on his property taxes, or trying to cheat by stealing an election and overthrowing the government, remember that Trump is always and everywhere looking to make money for himself with no regard for who gets hurt.

What this scheme depends upon for its success is for there to be investors (the so-called ‘longs’) who do not sell their stock quickly but hold on to it, either because they think that doing so shows their loyalty to SSAT or because they bought it when the price was high and hope that the stock will actually rise again in value, thus minimizing their losses.

Either way, they are suckers.