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Trump Financial: If I Were a Rich Man

There was some good financial news for Donald Trump yesterday and some bad news. We will start with the good; he found a sucker... er, an underwriter willing to issue the $175 million bond he needs to buy himself some time in New York. It's the Knight Insurance Group.

It is not known exactly what collateral Trump used in order to secure the loan, although the lender claims it was "grade-A bonds, investment grade quality securities" and cash. Even with this somewhat vague description, it is possible to infer some things. Knight Insurance has a middling rating of B++, and it is based in Los Angeles. That makes pretty clear that the former president really was left scrambling, since he couldn't find a highly reputable backer OR one based in New York. In turn, that probably also means that Knight is somewhat predatory, and that Trump had to give up more in collateral than would have been required of say, Bill Gates or Jeff Bezos or some other more reputable businessman. In any event, assuming Trump's lawyers get the paperwork in order, their client just bought himself roughly 5 months' worth of breathing room (until early September).

And now, the bad news. Yesterday, Trump Media & Technology Group (TMTG) made a required SEC filing in which it admitted that it lost $58.2 million on revenue of just $4.1 million in 2023. A big chunk of the loss was debt service, but even if we just consider operating costs, those were about four times revenue. While that may be a pretty close approximation of the business model that eX-Twitter is using, it's not a path to financial success.

It is very hard to believe that TMTG investors needed a wake-up call, but apparently they did, because the stock tumbled after the filing was made public yesterday, falling to $48.66 a share. That means it's lost 38.7% from its peak value ($79.38), and 18.7% from its opening price on Monday ($59.83). By virtue of Trump's holdings in the company, he lost just about $1 billion yesterday. Normally, it takes him months to lose that much.

Things don't figure to improve for Trump in upcoming weeks and months. Emily Stewart, at Business Insider, had a piece yesterday running down how the most prominent anti-woke stock offerings (Rumble, Black Rifle Coffee, Public Square) all shot up early on, and then tanked once investors learned they are not profitable. They're all sitting around $10/share right now.

Trump could try to dump stock while the price is high, but he'd have to get permission to ignore the 6-month moratorium. That's doable, since the board of TMTG is made up of cronies, but if he engages in a sell-off, it's going to send the message that even HE doesn't believe in the company, and investors are REALLY going to get spooked. It's already the most shorted stock on Wall Street.

Alternatively, Trump can hold off, and hope that the price is being propped up by MAGA fanatics and/or foreign "friends" who don't care about losing money, and will hold the stock no matter what happens. If that's not the case, though, then the former president could be left holding the bag. (Z)

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