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Business News/ Politics / Trump stock takes Washington by storm

Trump stock takes Washington by storm

Former president is close to tapping a multibillion-dollar windfall that could help pay his legal bills and bring much-needed cash to his campaign to return to the White House.

Truth Social has struggled to compete with larger social-media platforms, especially since Trump is back on Facebook and X. PHOTO: JOHN MINCHILLO/ASSOCIATED PRESS

Wall Street has always played a big role in politics, but never like this.

Wall Street has always played a big role in politics, but never like this.

Former President Donald Trump is tantalizingly close to tapping a multibillion-dollar windfall that could help pay his legal bills and give a much-needed cash injection to his presidential campaign.

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Former President Donald Trump is tantalizingly close to tapping a multibillion-dollar windfall that could help pay his legal bills and give a much-needed cash injection to his presidential campaign.

Almost no one saw it coming. Nearly everything went wrong with the get-rich-quick plan for Trump’s social-media platform to go public by riding one of the biggest speculative waves in market history.

As has often been the case with Trump, missteps and obstacles didn’t matter. The combination of luck and his most passionate followers has added a great unknown to the presidential race. And it has suddenly brought everything about social media’s growing influence over financial markets into politics.

“He’s the ultimate winner, at least on paper," said Matt Simpson, managing partner at Wealthspring Capital and an investor in shell companies like the one that took Trump’s firm public.

The result is a never-before-seen mashup of stock-market frenzy and political financing. Suddenly, Trump’s supporters can back his campaign by driving up shares of his company, a form of political expression that goes beyond buying hats or Bibles.

The parent company of Trump’s Truth Social, Trump Media & Technology Group, is now worth about $8.5 billion, more than toy maker Hasbro and almost as much as Caesars Entertainment, one of his old casino rivals. This for a company with about $5 million in sales in its existence.

Trump owns roughly 60% of the parent company of Truth Social, a stake valued at nearly $5 billion that would nearly triple his net worth.

The stock might not remain in the stratosphere, but if the company’s Trump-friendly board allows it, the former president could cash in at least hundreds of millions of dollars in the next few months. That could help ease his financial squeeze and boost his presidential campaign, which is trailing President Biden’s in fundraising.

Graphic: WSJ

Fundraising reports filed recently showed Biden’s campaign and allied committees had more than $155 million on hand at the end of February, compared with $74.4 million for Trump’s campaign and allied committees.

If the stock stays high and if Trump can sell or borrow against his shares, the numbers could be unprecedented in presidential politics. Candidates can invest unlimited amounts of their own money as long as they report it to the Federal Election Commission.

On Thursday, Biden brought in $25 million from an event in New York City with former presidents Barack Obama and Bill Clinton, a huge amount for a single-day event.

That is a rounding error in Trump’s new fortune, which can rise and fall by that amount in every minute of trading.

It isn’t clear if he would put his own money into his campaign. Asked by reporters about it last week, Trump said, “I might do that. I have the option."

Apart from the impact on the election, Trump’s stock has become a first-of-its kind way to play the outcome of the race. In the past, investors used shares of companies in policy-sensitive areas like clean energy to bet on election outcomes. Now, they have a heavily traded stock almost singularly tied to how Trump does in November.

Trump started his social-media company soon after he was tossed from X, which was then Twitter, and Facebook following the Jan. 6, 2021, uprising at the U.S. Capitol. The former president was toxic to many bankers and investors, making fundraising nearly impossible.

The company still hadn’t launched its social-media platform when late one night in October 2021 it announced that it would merge with a shell company, Digital World Acquisition, to go public. The blank-check firm was part of a wave of so-called special-purpose acquisition companies that had been flooding the market.

The deal looked like a winner at first, then things nearly fell apart. Truth Social was late to the SPAC party, missing out on the euphoria that drove shares of sports-betting and space-tourism companies to be worth billions. Investors were fleeing speculative stocks, taking down Digital World with the rest.

Graphic: WSJ

Two messy run-ins with regulators further tarnished the company. Shares fell by more than 90% from their peak, causing big losses for some of the investors who flocked to Trump’s side.

More bad news came quickly. Elon Musk bought Twitter, creating the welcoming place for conservative voices that Truth Social aimed to attract. Markets for speculative stocks were hammered by higher interest rates. Investors and analysts following that market questioned whether the merger would ever get done.

When 2024 began, Trump’s luck turned. Markets started to soar and Trump’s supporters returned to the stock. They were drawn in by Trump’s rapid march to the Republican nomination for president. The deal was approved and Truth Social’s parent hit the market on Tuesday.

Politics, SPACs and meme-stock momentum merged. The stock, with Trump’s initials as its ticker, is up some 250% this year, turbocharged by trading in options that give traders the right to buy or sell a stock at a specific price by a fixed date. “This is beyond what anyone could have expected," said Steve Sosnick, chief strategist at brokerage Interactive Brokers.

The longer the stock defies gravity, the sweeter the deal becomes for Trump. He could receive tens of millions of additional shares if the stock stays above certain levels in the next few years.

“This is going to work until it doesn’t. It’s impossible to tell when it will stop," said Evan Ratner, president at Levin Capital Strategies and a SPAC investor. He made money in recent days by buying the stock in anticipation of the merger’s completion, then selling after Trump supporters pushed it higher.

Write to Amrith Ramkumar at amrith.ramkumar@wsj.com

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