Gamestop, Set, Match: How Donald Trump Got Richer than Ever, Beat Tish James, and Sold Out his Own People

Trump Media’s IPO is a great illustration of the century’s most dangerous con man at work. And he's laughing all the way.

Mar 27, 2024

In a perfect metaphor for life in the 2024 timeline, Donald Trump became a billionaire one day after getting a court date for his first criminal trial.

As of today, Trump has more money and more financial power than ever before in his life, thanks to the IPO of a mostly fake company called Trump Media and Technology Group (let’s call it Trump Media; its ticker symbol is DJT, of course).

As I’m sure you know, Trump founded a terrible social media platform called Truth Social in 2021. Truth Social is doing very badly. In three quarters of 2023, it had less than $4 million in revenue and posted a $49 million operating loss. Users were down more than 35% compared with 2022. The product is in the toilet.

And yet, you probably also know that Trump’s stake in Trump Media, which owns this piece of junk, was worth $4 billion yesterday, and $5 billion today. How is that possible?

Scams. Three of them in fact: one secretive, one semi-secret, and one quite public.

Midjourney missed this one - the prompt was “Donald Trump laughing while he runs away from Letitia James, old master style.” But this image made me even angrier, so I kept it.

1. SPAC and Scam

Zoom back to September, 2021, when Trump Media and Truth Social launched. Around the same time, a “special purpose acquisition company” (SPAC) called Digital World Acquisition Company (DWAC) was also formed – apparently by associates of Trump, though by whom exactly is still unclear.

What is a SPAC? Unlike normal companies, SPACs don’t make or do anything; they look for companies to take public through a merger. For example, if you’re running a tech startup and you’re not quite successful enough for an IPO, a SPAC provides an alternate route to get to the market. The SPAC buys you, and either it’s already a public company or goes public, and presto: now people can buy shares in your company (and you can cash out – more on that in a moment). As a bonus, since it’s the SPAC that is technically public, not the actual startup, many of the traditional disclosures required at IPO time don’t have to be made. You can hide more.

DWAC was always about one particular acquisition: Trump Media. But DWAC’s founders concealed that fact, because that way they could set their share price low – around $10 per share. A month later, in October 2021, DWAC announced its plans to merge with Trump Media, and its value skyrocketed to $175 a share.

You can see the scam, right? Insiders bought into DWAC at an artificially low price, then disclosed the celebrity tie in, and the stock price ballooned.

To be clear, the high price was based on nothing real: at that time, Truth Social didn’t even exist, and Trump Media didn’t even have a CEO. (It quickly hired one: Devin Nunes, the congressman who went so far to help Trump that he shared classified materials with unknown individuals in the shrubbery around the White House.) All of DWAC’s value was based on Trump’s name, and the adoration for him among the MAGA base.

The SEC quickly launched a fraud investigation, which delayed the merger of for over two years. Many institutional investors bailed. Finally, in June, 2023 – after DWAC fired one CEO and hired another – DWAC and the SEC settled the claim. Said the SEC in its settlement announcement, “DWAC misled investors and the SEC by failing to disclose that it had formulated a plan to acquire and was pursuing the acquisition of Trump Media.”

What was the penalty for this fraud? All of $18 million – which is peanuts, considering the total deal value is over $5 billion (aka $5,000 million). This was an unbelievable miscarriage of justice. It’s barely a slap on the wrist.

As reported by Michael Hitzlik at the L.A. Times, this pattern is common in celebrity-driven SPACs. Canny insiders partner with a celebrity (Trump, Jay-Z, Shaq) to create a company out of nothing. Then, fans buy the stock out of fandom, delusion, or both, and the value shoots up before eventually settling down to earth. Insiders sell high and make a fortune, while the fans who bought high lose a ton of money when the bubble pops. It's a dirty business.

DWAC’s price eventually fell to $15 a share in October 2023.

In the words of stock-hyper Jim Cramer, quoted by Hitzlik, “these newer SPACs increasingly feel like an inside joke for the super-rich and a way for celebrities to monetize their reputations.”

First scam complete.

2. The Big Short Long

DWAC’s grift was just getting started, though. With the SEC placated by its penny-ante settlement, the merger went forward, and DWAC’s stock price rebounded to $49. The IPO took place today (March 26, 2024) and the stock surged again, hitting $68 at noon and finishing at $58.

Trump’s share is, as of this moment, worth over $5 billion. That’s right – he made a billion dollars today. How was your day?

Again, there is no rational basis for this: Truth Social is tiny and shrinking. Rather, like AMC, Gamestop, Bitcoin (and every other crypto security), tech bubble stocks of the 2000s, and tulip prices of the 1630s, this is a bubble. DJT is a meme stock, propelled by the emotional fandom of its supporters, not by anything remotely resembling financial metrics. Its price-to-earnings ratio is over 1000. Reddit’s is 10, Apple’s is 26. At the height of the initial AI boom, NVIDIA’s was 61.

It is obvious to anyone watching that this is unsustainable and will soon come crashing down. But hey, in the meantime, I’m tempted to buy some DJT stock myself, because it probably has higher to go before it pops. Same is true for Bitcoin’s latest rally, which is entirely due to the availability of crypto ETFs, thus enabling millions more dupes to be duped. (Note: I am not actually buying this stock, or Bitcoin, or recommending either in any way whatsoever.)

The trick with bubbles is getting out at the right time. You want to go long, but only for a short period of time (and then you want to sell short, if you can, making money twice). As with crypto, smart, connected investors do a little dance with the dumb ones: they pump up the security, then dump it after the idiots have bought in. As long as the smart money stays one step ahead of the dumb money, the “smart” ones (meaning, the rich, connected, and savvy) win every time.

This is where, in a normal world, Trump might be in trouble, because in transactions like this, there’s a customary six-month “lockup” period during which company insiders are forbidden from selling their shares. Six months is an eternity – by then, this party could all be over.

Except for scam number three.

3. In the Room Where it Happens

Trump Media has a seven-member board that can, at its discretion, remove the lockup provision. And who’s on that board? Among others, Donald Trump Jr., Devin Nunes again, plus Trump loyalists Kash Patel, Robert Lighthizer, and Linda McMahon, who just so happens to be running a high-end Trump fundraiser on April 6.

That’s five out of seven. It’s a slam dunk.

Nor could shareholders revolt, because Trump owns a special class of stock that gives him at least 55% of the voting power over any measure presented to shareholders.

So, Trump is a lock to liquidate as much of his DJT shares as he likes. Posting a $175 million bond is nothing. Even a $454 million bond is nothing. And while ordinarily, a company insider dumping his shares would cause the stock price to fall, in this case, Trump’s diehard fans would probably applaud, since they know the reason he’s doing it. (I’m puzzled why some commentators think Trump won’t do any of this. He obviously can.)

But why stop there? Nothing is stopping Trump from dumping another $1 billion of shares to fund his own campaign. This is more money than Donald Trump has ever had in his entire life. Previous claims of billionairehood were just hot air, but this time, it’s for real. Donald Trump has more financial power now than ever before.

(By the way, there’s a whole other possible line of insider shenanigan going on involving investor Jeff Yass, whose firms owns about 2% of Truth Social, and who just happens to have a significant stake in ByteDance, which owns TikTok. Yass has met with Trump, but there’s no evidence yet of any quid pro quo, and Yass isn’t the one directing this whole charade.)

New York Attorney General Letitia (“Tish”) James presented a masterful case against Trump, and won. But the penalty she obtained is peanuts next to the profits Trump just made. He’ll swat that judgment away like a little fly. I can’t believe liberals were crowing over which Trump properties James would seize. Did they really think he wouldn’t find a way to wiggle out of accountability? As he has done dozens, perhaps hundreds, of times before?

4. Laughing all the Way to the Bank

There are few takeaways here.

First, this is how capitalism works. There’s no level playing field, and hard work does not pay off as well as having money. The financial regulations that exist are meager, and the penalties are always inadequate. In fact, apart from that little non-disclosure in September, 2021, Trump and his cronies probably haven’t done anything illegal. As Trump himself said in defense of paying zero income taxes for many years, “I take advantage of the laws of the nation because I'm running a company. My obligation right now is to do well for myself, my family, my employees, for my companies. And that's what I do.”

Second, and relatedly, this is how Trump works. While he is clearly not book-smart – his vocabulary is that of an eight-year-old – he is street-smart in the extreme. He knows how to leverage his brand and reputation, and has been doing so for over forty years, from Trump Steaks and Trump University to the Oval Office.

But lest we forget, there are victims to this kind of pump-and-dump operation. The “dumb” people who buy at the top of bubbles can lose everything – their entire investment can easily go to pennies on the dollar. And they do that “dumb” buying because they are duped by people like Donald Trump, or crypto-dudes on YouTube, or whoever. (The Gamestop and AMC bubbles are a little unusual, in that they were in part motivated by a sincere group of independent investors, who were punished by Big Finance for gaming the system.)

Blame the marks for falling for the con if you like, but remember, the marks are Trump’s own fans. Like Steve Bannon’s build-the-wall scams and Trump’s own fundraising efforts, these efforts target people who, by and large, can ill-afford to lose a lot of money and who believe that Trump is on their side. It’s astonishingly cynical. He looks into these people’s eyes and he scams them. It’s sociopathic.

And when they do lose, no doubt they will blame it on liberals, the media, coastal elites, or whomever, thus postponing cognitive dissonance for another day. Thus the scam is always fresh, the religion ever renewed. As Leon Festinger discussed in the classic When Prophecy Fails, each setback only strengthens the faith of the faithful. If Trump goes to jail, the elites have won a round, so we must fight harder. If Trump Media stock goes to zero, it was a conspiracy by global financial elites (that means Jews, by the way).

But Trumpism is not populism, and never has been. It is a weaponized faux-populism, in which the demagogue rages against the elites but, actually, is one of them. Yes, Trump is culturally a boorish thug from Queens. But economically, he is in the one percent, and plays as dirty as the rest of them.

And this week, he won bigly.

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