Donald Trump is set to receive a substantial stock bonus from his social networking platform, Truth Social, as its shares soar.
This bonus, expected on Tuesday, could amount to $1.3 billion, nearly half of Trump’s current stake in the company.
With the commitment to hold all of his TMTG shares until September, Trump’s total share in Trump Media & Technology Group (TMTG) will reach $4.1 billion, significantly boosting his overall wealth, estimated by Forbes at $4.7 billion.
According to the terms of the special purpose acquisition company (SPAC) merger, Trump will qualify for the bonus if TMTG’s shares maintain their value above $17.50.
Despite the company’s operational losses, the earnout structure allows for this incentive.
Since going public on the Nasdaq last month, TMTG’s shares have experienced volatility, driven by speculation and support from Trump’s followers.
They closed at $35.50 on Monday, well above the $17.50 threshold required for Trump to receive the bonus.
“With more than $200 million in the bank and zero debt, Trump Media is fulfilling all its obligations related to the merger and rapidly moving forward with its business plan,” the spokesperson said.
The bonus is contingent on TMTG’s shares remaining above $17.50 for 20 consecutive trading days following its IPO on March 26. As of Monday, Trump had met the conditions for receiving the bonus.
TMTG’s current valuation stands at approximately $5 billion, a high multiple of its 2023 revenue of $4.1 million.
Despite concerns raised about its operational viability, TMTG’s shares have remained buoyant, contributing to Trump’s windfall.
According to a report from law firm Freshfields Bruckhaus Deringer, The current valuation stock earnouts for management were seen in more than half the SPAC mergers completed in 2022.
“Many earnouts in SPACs are never satisfied because many SPAC prices fall significantly after the merger is completed,” Levitt said.
However, few executives clinch these earnout bonuses because many SPAC deals end up performing poorly in the stock market, said Freshfields securities lawyer Michael Levitt.
TMTG’s case is rare because its shares are trading decoupled from its business prospects.
While the news of Trump’s bonus is significant, it underscores the common practice of stock earnouts in SPAC mergers, although few executives actually receive them due to poor stock performance post-merger.
When TMTG agreed to merge with the SPAC in October 2021, it had to trade above $30 for Trump to get the full earnout bonus.
The two sides amended the deal in August 2023 to lower that threshold to $17.50.
The terms of the deal, however, give Trump three years from the listing to win the full earnout, so he could have still earned it if the shares traded above the threshold for 20 days in any 30-day period during this time.
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