News: A moment of truth for Trump’s stock-market riches

Monday, November 4, 2024

A moment of truth for Trump’s stock-market riches

Nov 04, 2024

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QUICK FIX

Donald Trump ’s political future is hanging in the balance of the presidential election this week.

A major chunk of his fortune may be, too.

The former president currently boasts an estimated net worth of $5.6 billion, which he built up through his real estate dealings, years as a reality television star and, most recently, a majority stake in the parent company of Truth Social.

Trump’s position in the company, Trump Media & Technology Group – worth billions of dollars on paper – has become a major and highly volatile source of his wealth since the stock debuted on Wall Street eight months ago. Shares have ripped higher, plunged, climbed back and fallen again as investors have seemingly wagered on Trump’s electoral prospects.

Now, Trump Media is nearing what many on Wall Street see as a long-awaited turning point for the stock: the election itself. If Trump wins, investors could further jump into what would be a publicly traded entity controlled by the president-elect, potentially padding Trump’s paper riches even more. But a loss may trigger a dramatic selloff, some fear.

“It’s the only pure play on Trump winning,” Tuttle Capital Management CEO Matthew Tuttle told MM, referring to the stock. “If he loses, I think it goes to zero.”

The company’s fate in the market is yet another sign of how much the Republican presidential candidate has on the line heading into Tuesday. In addition, Trump is still facing a slate of legal cases whose outcomes could also hinge on whether he retakes the presidency. And he has stated publicly that he does not think he will run for the White House in 2028 if he loses this year.

“He’s on multiple high wires at the same time — financial, legal, political,” said Timothy Naftali , a presidential historian who is a senior research scholar at Columbia University’s School of International and Public Affairs, in an interview. “This is not something new for Donald Trump. The stakes are just probably the greatest ever.”

Of course, Trump has said he has “absolutely no intention of selling ” his nearly 115 million shares in Trump Media. And until he does, the value of those shares — about $3.5 billion, as of Friday’s closing price — is only theoretical wealth for Trump. What’s more, he has yet to lay out what he plans to do with the stock if elected. (Government ethics watchdogs are already fretting about it.)

"President Trump removed himself from his multibillion-dollar empire to run for office and forewent his government salary, becoming the first President to actually lose net worth while serving in the White House,” said Karoline Leavitt, national press secretary for the Trump campaign, in a statement. “Unlike most politicians, President Trump didn't get into politics for profit — he's fighting because he loves the people of this country and wants to make America great again."

A spokesperson for Trump Media did not respond to a request for comment.

Launched nearly three years ago Trump Media has set its sights on becoming a media giant.

Its prized asset is Truth Social, but the company — led by former Republican Congressman Devin Nunes — has recently expanded with the launch of a streaming service . Nunes said in a statement last month that Trump Media aims to become “a beachhead for free speech on the Internet and a central hub for news, entertainment, and discussion."

But Trump Media has struggled. A deal to take the company public was mired in years of delays before finally going through in March. It has yet to record a profit, questions are reportedly swirling inside the company about Nunes’ management, and Truth Social’s user base is a fraction of that of the Silicon Valley giants that Trump Media aims to compete with. Data from Similarweb, an analytics tracking company, shared with MM shows that Elon Musk’s X has 100 times more monthly active users on iOS and Android apps in the U.S. than Truth Social.

Still, the company is valued at a whopping $6.1 billion today — and that’s even after the stock tumbled last week.

“There’s nothing, from an economics point of view or a business model point of view, that makes this make sense,” said Mike Stegemoller, a finance professor at Baylor University. “It feels more like a pop culture thing than it does [rational].”

Indeed, Wall Street pros have long attributed Trump Media’s wild swings to the meme-stock movement — a pandemic phenomenon where traders drive up the shares of companies like GameStop based on the vibes around them, rather than the underlying businesses.

And tomorrow’s election appears primed to fuel further volatility in Trump Media and, as a result, Trump’s stake.

“Trump is sort of riding a tiger,” Naftali said, while discussing the stock. “His investors are invested in him winning. Now he is, too.”

IT’S ELECTION DAY EVE — Hope you’re ready to go for what will be a crushing week of news. If you want to talk Wall Street policy, whoever wins the election, give me a shout: dharty@politico.com. And, as always, send your tips and news to Sam at ssutton@politico.com.

A message from BPI:

Correcting the Record on the CFPB’s “Open Banking” Rule — MYTH: Fintechs are held responsible for securing data under the CFPB’s Section 1033 rule. FACT: The CFPB takes no accountability for overseeing or supervising data recipients (e.g., fintechs) under this rule and fintechs take no responsibility when things go wrong. Banks are forced to police whether fintechs are employing appropriate security measures. It’s unclear when banks can deny access based on legitimate security concerns. Learn more: KeepBankingSafe.com.

Driving the Week

Tuesday … The election.

Wednesday … Acting SEC Enforcement Director Sanjay Wadhwa, Associate Enforcement Director Melissa Hodgman and other officials speak at the Securities Enforcement Forum in D.C., which starts at 8 a.m. … The Federal Open Market Committee kicks off its two-day meeting.

Thursday … The FDIC Advisory Committee on Community Banking meets, starting at 9 a.m. … The FOMC announces its interest rate decision at 2 p.m., followed by Federal Reserve Chair Jerome Powell’s press conference.

Friday … Fed Governor Michelle Bowman speaks at the University of Mississippi School of Business’s Banking and Finance Symposium in Oxford at 11 a.m. … CFTC Commissioner Christy Goldsmith Romero receives the National Asian Pacific American Bar Association’s Daniel Inouye Trailblazer Award, a lifetime achievement award, in Seattle at 9 p.m.

JD and the businessmen — Former President Donald Trump already has a strained relationship with much of the corporate world. Now, as our Hailey Fuchs and Sam Sutton report in a piece published over the weekend, business leaders are fretting about his No. 2: JD Vance.

“With Vance by Trump’s side, some corporate leaders worry a second Trump administration would be even more hostile to their interests than the first was. While he would have little agenda-setting power of his own, Vance would likely reinforce Trump on key economic issues — trade policy, labor issues, market power — unlike former Vice President Mike Pence, who acted more as a check on Trump’s populist leanings,” Fuchs and Sutton report.

Trump’s transition effort — Trump’s transition efforts are starting to come into focus with familiar names leading the charge. U.S. Trade Representative Robert Lighthizer, who is crafting trade and economic plans, along with Jamieson Greer, Lighthizer’s former chief of staff. And Kevin Warsh , a former member of the Federal Reserve Board of Governors, is also involved with the economic portfolio.

Those who’ve worked with Lighthizer say he’s capable of maximizing Trump’s authority on trade policy if he returns to the White House. “Lighthizer was definitely creative, I think you should keep that in mind,” Ronald Baumgarten , an of counsel at BakerHostetler who served as a deputy assistant U.S. Trade Representative for Southeast Asia and the Pacific during the Trump administration, told Sam Sutton. “He's a very creative person, and [he and his team] were willing to look at the law and figure out ways to be creative with the law.”

And Warsh was once in the running to be Trump’s selection to lead the Federal Reserve. Flashback from Victoria Guida : “At the Fed, he was part of the inner circle of then-Chair Ben Bernanke, who in his book “The Courage to Act” described Warsh as one of his most frequent companions in meetings and on conference calls during the financial crisis. He also worked as a go-between for CEOs and the Fed board.”

First in MM: Crypto cash isn’t slowing down — Major players in the more than $2 trillion crypto markets have already made their mark on this year’s elections. But, as our Jasper Goodman reports this morning, the money has yet to dry up. Venture capital giant Andreessen Horowitz is now pledging to give another $23 million to the crypto super PAC group, known as Fairshake, boosting its coffers to at least $78 million ahead of the 2026 midterms, Jasper reports.

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2024 ELECTION

Lee for HUD — The line to join Vice President Kamala Harris’ administration if she wins the presidency is beginning to take shape. Among those jumping in? Rep. Barbara Lee, who our Eleanor Mueller reports is signaling an interest in becoming Housing and Urban Development secretary.

— ICYMI: Food prices give Democrats anxiety in Pennsylvania — From our Marcia Brown: “There are few places in America that have seen food prices spike as dramatically over the last four years as Philadelphia and its suburbs. The fallout could decide Democrats’ fate in the critical swing state of Pennsylvania, according to interviews with more than 30 voters, elected officials and political operatives.”

Jobs report

First in MM: Kofsky departs Vance’s office — On Capitol Hill, Aaron Kofsky — who began working for the Ohio senator last year and advised on financial policy — tells your MM host that he has left Vance’s office.

His departure follows recent reporting from Wired about Kofsky’s online musings, which included posts on using hard drugs. In a statement, Kofsky told MM that “it’s been an honor to serve Senator Vance and the people of Ohio over the past two years,” adding that he regrets his actions and is “thankful that dark period in my life is far behind me.” A spokesperson for Vance’s office did not respond to a request for comment Sunday.

“Listen, I definitely screwed up, but we’ve reached an unprecedented level of absurdity when this much work goes into smearing an America First staffer,” Kofsky said, adding that he believes “something else is going on here.” “I look forward to my next chapter.”

A message from BPI:

World view

The global view from Citi’s Brent McIntosh — Zach Warmbrodt and Victoria sat down with Citigroup chief legal officer Brent McIntosh to get his take on the state of the world, U.S.-China policy and regulations. McIntosh isn’t just a top executive at one of the largest global banks – he also previously served as the Trump Treasury Department’s under-secretary for international affairs.

McIntosh said discussions around the recent IMF-World Bank meetings in Washington were “consumed by geopolitics and the American election.” He said the mood on the economy was mixed, with “optimism” about the U.S.; a sense of “bright spots” in places like India, Japan, Brazil, Mexico and the ASEAN countries; and then concern with northern manufacturing areas of Europe and debt overhang in emerging markets.

On U.S.-China policy, McIntosh said he expects “some amount of continuity” to Trump or Harris.

“That said, the possibility of tensions in that part of the world is always very real, whether because of intentional provocations or accidental provocations in the South China Sea or on economic matters. People are pretty concerned about what happens with the relations between China and the West.”

China is an important part of Citi’s business. As such, the bank is keeping a close eye on Capitol Hill negotiations around legislation that would restrict U.S. investment in the country. Citi’s view is that the policy should be “targeted, strategic, administrable, narrow to the things where it really matters” — meaning national security concerns.

“The suggestions we've heard coming out of the Hill are that the outbound regime that they're talking about is one that is not intended to be all about decoupling the two economies, but more targeted to particular technologies and sectors. I would say that’s a good thing.”

What’s his outlook for U.S. financial regulation after Tuesday?

“In whatever administration is elected … we would hope to see a return to a regulatory environment that is very consistent with the obligations to engage in reasoned decision-making on a time frame that allows industry to comment on the rules, and that ultimately is designed to empower the American economy.”

Fed File

First in MM: Warren, Hickenlooper call for half-point cut — Sen. Elizabeth Warren (D-Mass.) and Sen. John Hickenlooper (D-Colo.) are calling on Fed Chair Powell to slash rates by half a percentage point at the central bank’s upcoming meeting this week, Sam reports.

The lawmakers have repeatedly called on the Fed to lower interest rates, and they cited the softening labor market and housing costs as the main factor for why the Fed should slash rates by a half-point — double its normal move. “The Fed needs to continue delivering much-needed relief from high borrowing costs to American families,” they wrote.

“We have received the letter and plan to respond,” a Fed spokesperson said in a statement.

A message from BPI:

Did You Know: The Treasury Department issued a report in 2022 finding that “…there is virtually no regulatory oversight of data aggregators’ storage of consumer financial information akin to the supervision of [banks’] data security.”

Furthermore, a survey conducted by The Clearing House found:
- 80% of consumer respondents were unaware that third-party app providers gather users’ financial data;
- 73% were unaware that fintech apps have access to username and password information; and
- 78% were unaware that aggregators have access to personal data even when the app is closed or deleted.

Giving third parties access to a customer’s bank accounts under the CFPB’s Section 1033 rule without regulatory oversight undermines the existing robust data security protections banks employ.

Learn more at KeepBankingSafe.com.