Dan Alexander:
Well, something’s worth what people are willing to pay for it.
And there are a lot of people right now who are extremely excited about the idea that they can buy stock and therefore become sort of a business partner of Donald Trump. Now, that doesn’t have anything to do with the financials. It doesn’t have much to do with the future of the company.
There’s no serious stock analyst who would say that this valuation makes sense. But, nonetheless, if enough people are excited about something, then what you have is mania, and people get excited and they bid it up to a crazy price, which is where we are.
Dan Alexander:
Yes, and that’s a key point.
He has lockup provisions as part of this deal, which prevent him from either selling or borrowing against those shares for roughly six months. Now, maybe something happens where they can tweak the rules, but, in doing so, they would essentially be inviting shareholder lawsuits. And I think it would be difficult for them to be able to change it.
What Trump is hoping for here is that the stock price will be able to hang on for those six months, maybe not at its sky-high level that it is right now, but, even if it dropped by 50 percent, that’s still an enormous amount of money for him that he can, sell those shares, part of them, nearly all of them, whatever, and cash in a huge amount of money, money that he hasn’t seen in years.
Dan Alexander:
It does.
If you look back at Donald Trump’s history, he is really a master at convincing people to throw piles of money at him, even when they should be wary. And what’s interesting is, if you look at this over the years, the sorts of people throwing those piles of money at him have become less and less likely to scrub the financials of the actual business.
So, if you go back to the 1980s, when he’s building in Atlantic City, he’s borrowing from A-list, names you would know, banks on Wall Street. These are people who are going to scrub financials very carefully. However, they didn’t do it carefully enough in that case. And there were several bankruptcies, and many of those lenders lost money.
Then he went to the public markets, which are known for being — for putting some scrutiny in, but maybe not as much, or they’re not as careful as banks are. And, ultimately, his casino company, as a public — publicly traded entity, went bankrupt twice, and those stockholders got wiped out.
Now, you have the latest iteration of this, where he’s going back to the public markets, now capitalizing on his political supporters who want to be in business with him and also just on people who like trading meme stocks. Some people like going to the casino. Other people like trading meme stocks and just seeing what’s going to happen.
These are not people who are going to be carefully looking at the financials and figuring out, OK, does this valuation make sense? And do I think that this company is going to be profitable enough to justify my investment? By and large, these are people who just say, hey, I want to be in business with Donald Trump and here’s my opportunity to do so.
