Lawyers for Donald Trump told BourseWatch that he should not sell his Trump Media & Technology Group Corp. stock after saying he doesn’t plan to.
Trump is the biggest stockholder in Trump Media & Technology Group DJT -4.61%, which is the parent company of the Truth Social site. He owns 114.75 million shares of that company. The share price on Tuesday was $16.77, which means that his stake is worth about $2.43 billion. The market value of the company as a whole is about $3.5 billion.
Trump is bound by a lockup agreement, which says that insiders can’t sell shares right after an IPO. However, page 4 of this filing says that the former president and current GOP presidential nominee will be able to sell his stock as early as Friday, as long as the price of a share stays above $12 until then.
As of September 25, Trump would be able to sell his stock if the price falls below $12 in the next few days. It will have been six months since the company went public after merging with Digital World Acquisition Corp. for that date.
Saturday, Trump said he has no plans to sell his shares in Trump Media & Technology Group. On Friday, the stock went up.
Chris Manderson, chair of the business department at Ervin Cohen & Jessup LLP, said that Trump could get into more legal trouble if he changes his mind soon and decides to sell the stock anyway.
Based on rules set by the U.S. Securities and Exchange Commission, Manderson said he would tell any big shareholder not to sell stock in a company soon after saying in public that they would not do so.
When someone buys or sells a security, Manderson said, “SEC rules say that they can’t lie about a material fact or do something that would be considered fraud or deceitful.” “So if a big shareholder says in public that they won’t sell and then quickly sells, that could get them in trouble with the SEC and other stockholders, especially if they said they wouldn’t sell to drive up the price of the stock.”
In this case, private claimants would have the right to sue. He also said that the SEC could look into stock fraud and will sometimes be the plaintiff in such cases.
Lockups are private business deals or contracts that key investors and companies going public make with the help of lawyers and investment bankers.
They are often part of initial public offers to stop insiders from selling shares right after a company goes public, which would lower the price of the stock. Most lockups last for six months.
He said, “The economic reason for lockups is to keep a company’s stock price stable after it goes public so that the stock trades up.” No one wants more shares to come on the market right away and bring down the price of the stock. “If insiders did sell off stock right after the IPO, it sends a bad message to the market and shows that people don’t trust the IPO.”
A statement says that Trump put his shares on the market for possible sale on April 15, but he hasn’t released a 10b5-1 stock-trading plan yet.
In order to follow insider trading rules, these kinds of plans let people who work for the company sell a set amount of stock on certain dates.
It’s not needed by law for Trump to put his “DJT” stock into a blind trust if he wins the election, but other presidents and vice presidents have done it.
Halliburton does business with the U.S. government, so Richard Cheney, who used to be vice president, put his Halliburton Co. stock HAL 2.13% into a blind trust to avoid any possible conflicts of interest. Because of this, Manderson said, a blind trust is “a legal structure entered into for political reasons, not a legal requirement under corporate or securities law.”
There is no one in charge of Trump Media & Technology Group by Trump. According to company records, he’s just the biggest shareholder. But his son Donald J. Trump Jr. is on the board of the company.
Trump and some members of his family just recently started a bitcoin business as well.
