Here’s what happened the last time Trump tried to take one of his companies public

24.03.2024 16:14

Raw Story

Former President Donald Trump's Truth Social platform is set for its initial public offering (IPO) as soon as next week after its merger was approved by a special purpose acquisition company. But while Trump himself stands to reap a multibillion-dollar windfall, investors may not be as lucky given Trump's past IPO record.

According to NBC News, Trump's last attempt to go public crashed and burned relatively quickly, with investors getting soaked even as Trump reaped significant benefits. A few months before the 2016 presidential election, the Washington Post reported that when the business mogul took Trump Hotels and Casino Resorts public, it plummeted from a $14 per share IPO to a penny stock in less than a decade.

"In its short life, Trump the company greatly enriched Trump the businessman, paying to have his personal jet piloted and buying heaps of Trump-brand merchandise," the Post's Drew Harwell wrote at the time. "Despite losing money every year under Trump’s leadership, the company paid Trump handsomely, including a $5 million bonus in the year the company’s stock plummeted 70 percent."

NBC reported that Trump Hotels and Casino Resorts performed relatively well for a time, hitting a peak of $35 per share in 1996. However, once it purchased a casino for $100 million more than it was worth, the value of the company's shares started to slide precipitously.

"The year the stock peaked, it lost $66 million. In 1999, it lost $134 million," NBC reporter Dareh Gregorian wrote. "And in 2004 — when the company filed for Chapter 11 bankruptcy protection and was delisted from the New York Stock Exchange — it lost $191 million, according to a CNBC review."

Truth Social may end up suffering a similar fate after its parent company, Trump Media & Technology Group, debuts its IPO on the Nasdaq exchange. Even though Trump himself is expected to net roughly $3.5 billion from the deal, it may be a considerably more risky bet for mom-and-pop investors.

CNN reported that Truth Social is "hemorrhaging users" and has just roughly 860,000 active accounts. That's far less than other far more popular social media networks like Facebook, Instagram, Whatsapp, X/Twitter and TikTok. Truth Social is reportedly not even among the top 100 apps downloaded on Apple's App Store, and the company's own management worried it could go belly-up if its merger wasn't approved.

"It's grossly overvalued,” University of Florida finance professor Jay Ritter told CNN. "It qualifies as a meme stock for which the price is divorced from fundamental value."

All eyes are on Trump's finances as he struggles under the weight of multiple civil judgments nearing $600 million in total. The former president owes roughly $464 million in penalties and interest to the State of New York after Judge Arthur Engoron found him guilty of artificially inflating the value of his real estate portfolio. He also recently posted a $91 million bond in his appeal of writer E. Jean Carroll's defamation verdict against him. That judgment came down after a 2023 judgment in which Trump was found guilty in a separate civil case of sexual abuse.

Despite his pending $3.5 billion payday, Trump is prohibited from selling any of his shares for six months, meaning he won't have any immediate help from the IPO in paying his legal costs.