Conservative-leaning social media outlet Trump Media & Technology (NASDAQ:DJT) continues to reward its biggest stakeholder, Former President Donald Trump. With DJT stock hitting milestones, Trump essentially receives bonus shares. While circumstances appear quite auspicious for supporters, controversy continues to cloud the enterprise.
Yesterday, CNN reported that the presidential candidate landed another $1.8 billion worth of DJT stock. This reward is known as an earnout. It was triggered when DJT shares traded above certain levels. In a filing, Trump Media stated that on April 26, the company determined that the underlying performance standard had been met. Subsequently, it issued the earnout shares to Trump.
With the earnouts, the former president now owns 114.75 million shares of DJT stock. That amounts to 64.9% of the total outstanding volume. Still, it hasn’t been an easy ride, with shares gyrating wildly since their public market debut.
Further, CNN points out that “[t]he earnout shares Trump just received are subject to lock-up restrictions that prevent insiders from selling or even borrowing against their stock for months.”
DJT Stock Hit With (More) Controversy
Trump’s charismatic personality commands a strong following, so it’s not surprising that DJT stock rose higher on speculative trading. Still, various controversies cloud the longer-term viability of the underlying business.
At the moment, a major distraction stems from the New York federal criminal trial of Bruce Garelick. The U.S. government accuses Garelick of insider trading regarding DJT stock prior to the blank-check merger agreement with Trump Media.
Notably, Andy Litinsky, a co-founder of Trump Media, represented the first witness in the case against Garelick. Complicating matters is that Litinsky himself is involved in civil litigation against Trump in multiple jurisdictions. Per CNBC, the matter centers on how many shares of DJT stock Litinsky is owed.
In the insider trading case, the federal government accuses Garelick of sharing non-public material information about the business combination that brought Trump Media into the public market with his boss, Florida venture capitalist Michael Shvartsman and his brother Gerald.
The defense argues that Garelick did buy pre-merger DJT stock. However, his attorneys argue that he stopped acquiring shares when he began learning information that could affect the stock price if the news was publicly disclosed.
Political Uncertainty
Of course, the other controversy is that Trump is also involved in several lawsuits. Fundamentally, the rise of DJT stock offers the former president a potential cash influx. However, Trump’s equity in DJT is subject to a lock-up restriction.
Even if Trump were able to get around the lock-up agreement, dumping DJT stock without crashing the share price would represent a significant challenge. In addition, such a loss of value is politically risky due to the cynical nature of the transaction.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
