NEW YORK CITY -- For months, former U.S. president Donald Trump has been sitting on a social media fortune that he couldnât touch. That will change very soon.
The lock-up period prohibiting Trump from selling or even borrowing against his US$2.3 billion stake in Truth Social owner Trump Media & Technology Group (DJT) is scheduled to expire by September 25, according to filings.
In theory, this will give Trump access to a pot of money that he could use to pay sky-high legal fees or even fund his presidential campaign. In reality, Trump faces huge obstacles that would make it very challenging to sell a large chunk of Trump Media â unless he doesnât mind crashing the stock.
âIt would be all but impossible for Trump to liquidate his whole stake or even a third of it without completely tanking the stock price,â Michael Ohlrogge, an associate professor of law at the New York University School of Law who has specialized in corporate governance and financial regulation, told CNN in a phone interview.
And the share price is already tanking.
Trump Media sinks to post-merger low
Trump Media tumbled another four per cent on Wednesday, trading during the session below $20 for the first time since the merger that formed the company this spring.
Trump Media has lost a staggering 70 per cent of its value since late March, a selloff that has accelerated as Vice President Kamala Harris, the Democratic nominee, has gained in the polls against Trump.
That selloff has put a serious dent in Trumpâs net worth.
As recently as May 9, Trumpâs dominant stake of 114.75 million shares of Trump Media was valued at US$6.2 billion.
But Trump couldnât touch that fortune because, as is typical in deals like this, certain shareholders are subject to a lock-up period that prevents insiders from immediately selling.
According to filings, that lock-up period is scheduled to expire for Trump on September 25, but it could come even earlier.
The lock-up would lift if Trump Mediaâs share price equals or exceeds US$12 for any 20 trading days within a 30-trading day period starting on August 22. As long as the stock doesnât keep plunging, this would translate to the restrictions lifting as soon as September 20.
'Rats jumping off a sinking ship'
The central problem Trump would face in selling most of his stake in Trump Media is that he is the dominant figure for this company.
Not only does Trump own a majority of the shares, he is the most popular user on the companyâs central product, Truth Social. The companyâs ticker symbol is even âDJT.â
Racing for the exits could easily trigger a loss of confidence in Trump Media
âYou donât see sizable shareholders like President Trump selling a lot of stock because it drives the price down,â said Charles Whitehead, a professor of business law at Cornell Law School. âFrom the marketâs perspective, it may look like rats jumping off a sinking ship.â
Investors would similarly be spooked if Elon Musk suddenly dumped most of his shares in Tesla or Mark Zuckerberg sold a massive amount of Facebook owner Meta.
Trump Media insiders are selling
Some Trump insiders are already selling, perhaps contributing to the recent selloff in the share price.
For instance, Phillip Juhan, Trump Mediaâs chief financial officer and treasurer, recently disclosed selling US$1.9 million worth of stock. Trump Mediaâs general counsel Scott Glabe, chief operating officer Andrew Northwall and chief technology officer Vladimir Novachki made smaller sales last week too.
Even Devin Nunes, the former Republican congressman who now serves as Trump Mediaâs CEO and president, dumped US$632,000 worth of stock last week.
In Trumpâs case, there could be political considerations, too.
âIf Trump were to sell a large number of shares and the stock price tanks, to some degree he would be burning his own supporters who bought the stock,â said Jay Ritter, a finance professor at the University of Floridaâs Warrington College of Business. âPolitically, that may not play out real well for him.â
'Grossly overvalued'
Another problem is that experts say Trump Mediaâs price tag defies logic.
Despite the recent selloff, Trump Media is still valued at nearly US$4 billion. And thatâs hard to square with the fact that the company made just US$837,000 in revenue last quarter.
âItâs grossly overvalued,â Ritter said. âItâs hard to come up with a value of the company that is much more than the cash on the balance sheet.â
Trump Media is sitting on US$344 million of cash and equivalents, funds the company has said it could use to build out its streaming business.
Ohlrogge, the NYU professor, said the fundamentals âlook even weakerâ than before Trump Media went public because supporters canât argue the company is cash-constrained.
âThe current price is way higher than can possibly be justified based on fundamentals,â Ohlrogge said.
While Trump may be unable to sell many shares at this point, there is another way he could tap his Truth Social fortune. Once the lock-up period expires, Trump will no longer be prohibited from borrowing against his stake in Trump Media.
That means Trump could pledge some or all of those shares as collateral in a loan.
Of course, as Ohlrogge noted, âa lot of banks are reluctant to do business with Trump due to their past interactions with him.â
But even if banks wonât lend to Trump, rich supporters could.
âIt could be a wealthy individual who either thinks itâs good business or they see it as an opportunity to get on the good side of someone who might be the next president,â Ohlrogge said.
Experts say that if Trump does borrow against his Truth Social stake, he may not be required to disclose it.