I didn’t think too much about Donald Trump prior to him becoming a serious presidential candidate in 2015, but growing up in the New York media market I was well aware that he was an accomplished hustler and charlatan. Nothing he did as a candidate, president and now ex-president has changed my initial impression of him. In fact, I’ve spent the intervening six years learning much more about the myriad ways in which Trump is a classic scam artist. To be polite, most of his business ventures are highly sketchy.

During his presidency, some of the sketchiest episodes involved Rep. Devin Nunes of California who, when he wasn’t involuntarily recused, served as the top Republican on the House Intelligence Committee and ran serious interference on Robert Mueller’s Russia investigation.

Needless to say, I don’t think it’s promising that Nunes is retiring from Congress to become CEO of Trump Media & Technology Group, a new venture of the ex-president’s that Bloomberg finds highly suspect.

Nunes will be charged with developing a new social media platform called TRUTH Social. But it looks more likely that a bunch of people will get rich swapping shares of this company than that Nunes will ever produce the promised product.

One sign of trouble is that the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) are already investigating the financing of the operation. While it’s above my pay grade to fully understand the structure here, let alone to explain it adequately to you, it appears that a special purpose acquisition company (SPAC) called Digital World Acquisition Corp. (DWAC) was created to attract investors and eventually merge with Trump’s social media venture and that the main appeal is that investors can sell the stock immediately after purchasing it.

The mechanism is a PIPE (a private investment in public equity). On Saturday, Trump announced that he had a billion dollars in investment for TRUTH SOCIAL, and the PIPE is where that money initially goes.

Donald Trump’s new social media venture said on Saturday it had entered into agreements to raise about $1 billion from a group of unidentified investors as it prepares to float in the U.S. stock market.

The capital raise, details of which were first reported by Reuters on Wednesday, underscored the former U.S. president’s ability to attract strong financial backing thanks to his personal and political brand. He is working to launch a social media app called TRUTH Social that is at least several weeks away.

As Bloomberg reports, once DWAC and TMTG merge and go public, the FIDE investors can cash out.

DWAC and TMTG have promised the PIPE investors that they’ll be able to freely resell their stock the minute the merger closes. If they can’t — if the SEC has not yet signed off on the registration statement — then they get 2% to 6% interest per month, paid out of a 20% escrow on the money they put up.

One immediate risk is that this will create a “death-spiral convertible,” which is exactly what it sounds like. Basically, all the incentives lead to selling off the stock until almost no value is left and retail stock buyers are left holding the bag. In some sense, it’s already designed that way.

Still the important point is that the PIPE here is explicitly designed for TMTG to sell stock to hedge funds at a huge discount, and for those hedge funds to immediately turn around and sell the stock to retail investors at a markup. That’s why the conversion price and registration rights are set up the way they are. This is an indirect way to do a big meme-stock offering to retail investors, with some hedge funds standing in the middle and getting a cut.

The structure is set up as a safe and probably lucrative investment for the folks offering the initial billion, provided they don’t hold the stock for long. Those favorable terms, more than the strength of the product or Trump’s brand is why they found it so easy to raise cash.

The thing is, the product doesn’t really exist yet and there’s not much transparency about who is actually working on it. Even the paperwork they filed with the SEC provides no last names for the people on their technology team and notes the personnel is subject to change. If I were putting big money behind a tech venture that promises $3.7 billion in revenues by 2026, I’d want to know who is building the tech. Quite obviously, Trump’s PIPE investors either have information not provided to the SEC or the public, or the terms of the deal are so good that they don’t care if revenues ever materialize.

So, yes, I’m suspicious that a Trump business venture run by Devin Nunes might not be on the up-and-up, and the SEC and FINRA clearly share my concerns.

On one level, Trump seems to be going to a lot of trouble in an effort to get something comparable to his Twitter toy back. He always liked Tweeting better than running his business or the nation’s affairs and he’s clearly still in withdrawals after his post-January 6 suspension.

But creating a new social media platform for MAGA people is a giant opportunity for grift, and not just from Trump and his family. All the early investors are in on this scam, and it could be that the end result is that a lot of red-hat retail investors go broke and there’s no social media platform at all.

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