Trump Had A Public Company Before. It Was A Disaster

Donald Trump announced plans Wednesday to transform a brand new company called Trump Media and Technology Group which will become an openly traded company by combining it with an acquisition company with special-purpose, also known as a SPAC. If the agreement is accepted, it will allow Trump’s company to get access to about $290 million in cash that it can be used to develop a Twitter knockoff or launch other media ventures. Investors are ecstatic about this idea. Shares of SPAC have risen by up to 350% Thursday. But they could be less happy if they had complete knowledge of how Trump has treated people who placed bets on Trump during the previous administration.

A quarter-century ago, the real estate tycoon also took a company to market, Trump Hotels and Casino Resorts, and listed it at the New York Stock Exchange. The company was launched in all of the laurels and excitement you imagine from a 1995 Trump production. “This is a big day for us,” Trump stated to a newscaster while the second spouse of his, Marla Maples, looked at him with admiration. Investors bought $140 million of shares, bet on the company, and bet on Trump. The ticker symbol of the company was DJT.

It wasn’t long before Donald John Trump betrayed his shareholders by doing things that benefited him but hurt the overall business. Trump Hotels and Casino Resorts were founded with just one Atlantic City casino, but Trump himself owned two casinos in addition to the ones owned by the company. In less than a year of making the company public in 2013, he used it to buy two casinos, the one burdened by debt, the Taj Mahal, with a price that put the stake to $40.5 million. The deal helped Trump’s balance sheet; however, the company was in a state of crisis, with a massive level of credit. In the course of the agreement, Trump also collected $51 million in liquid cash and $11 million worth of stock in exchange for the land that was previously rented to the company for around 5percent of the price per year. Then, a few months later, Trump Hotels and Casino Resorts announced that it would pay $500 million more for the third Atlantic City casino. In the beginning, one analyst believed that the casino was worth around $400 million, indicating that Trump was taking the public company for $100 million. Investors smelt the rottenness, and the shares plunged 37% in the span of a few days.

Self-dealing wasn’t over, however. The year 1998 was when Trump got two of his loans from Trump, obtaining 11.1 million dollars in one case and $13.5 million in the other. Trump Hotels and Casino Resorts have accumulated approximately $13 million worth of costs for entertainment on other Trump properties with Trump’s aircraft and leasing space within Trump Tower. Trump also paid several expenses. There was a contract that paid him according to his performance at a particular casino. However, under the contract terms, Trump had to “promptly” repay the cash if things turned nasty. Things didn’t go as planned. However, Trump retained that $1.3 million. This publicly traded firm ultimately was able to credit the unaccounted-for funds against its latest earnings. In a separate instance, the independent Trump company was able to collect $1.3 million in the course of a “services agreement.” According to a form submitted to the Securities and Exchange Commission, however, the company that Trump’s company was a part of had “not required to devote any prescribed time to the performance of its duties” to recover the funds. The nickel-and-dime transactions have added up. Between 1995 and 2004, Trump personally received around $50 million in salaries, fees, rents, and other expenses. In the same time frame, the company suffered losses of $647 million. In 2004, the company declared bankruptcy.

Trump kept his position in the chairmanship of the business and has changed the name of its business to Trump Entertainment Resorts, but Trump was fired as the chief executive. As part of a revised services agreement, the company continued to pay him around $2 million per year, much more than the CEO who replaced him earned in the amount of his annual salary. Trump was also given the power to choose several board members. His daughter, who is 25 years old, Ivanka Trump, joined the board in 2007. In exchange for her service, Ivanka received $150,000 of cash each year. The company suffered losses of 189 million dollars in 2007 and $232 million in 2008. In February of 2009, Ivanka, along with Donald Trump, both resigned from the board. A few days later, the company declared its bankruptcy once more.
Investors who placed their money into Trump were stung. Trump came out well and even used the situation to showcase his ability as a businessman. “I have used [bankruptcy] to my advantage as a businessman–for my family, for myself,” Trump said on stage during the 2015 presidential debate. “Hundreds of businesses I’ve started–I’ve had to use it three or perhaps four times. I’m pleased with the results. However, I suppose I’m supposed to do fantastic. This is what I can be doing for my country.”

It’s challenging to know what the role of Trump will be in his latest venture. A representative from Trump Media and Technology Group Trump Media and Technology Group has not responded to inquiries for clarification. The press release that announced the intention to go public referred to Trump as the previous president’s chairman of the company. Investors should be hoping that he treats his investors differently this time around.

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Adam Collins
Adam writes about technology, business and economics. With master's degree in Economics, he's presented six papers in international conferences. As a solivagant in the constant state of fernweh, curiosity is the main weapon in his arsenal.

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