Trump’s Loose Lips Risk Running Afoul of SEC

Restraint has never been Donald Trump’s strong suit. The former President seemingly lashes out at any perceived slight within earshot, leading to countless public feuds with everyone from Pope Francis to C-list celebrities to the mainstream media. The revelation of the distressing state of his latest venture, Trump Media & Technology Group, set the stage for the presumptive Republican Presidential nominee to go on the offensive.

The latest quarterly report from the company indicated TMTG generated a $4 million in revenue last year. As a result, the company lost nearly $60 million in 2023. Since TMTG effectively went public in March through a merger with a special purpose acquisition company (SPAC), the price of its stock has cratered. In the process, the company has lost billions of dollars off its valuation of $7 billion at the time its shares started trading on public stock exchanges. Selling the stock short, meanwhile, is pricey.

Trump is using TMTG’s Truth Social media platform to offer up his own version of events. The commentary has come with the usual rhetoric expected from his missives, including a claim that “Radical Left Democrats” are trying to torpedo his company. Apparently, the consensus of securities analysts and market observers is politically motivated.

Of potential interest to regulators, Trump said TMTG has “no debt and over $200 million in the bank.” That seems like material information for investors. But there’s little reason to believe it’s true, judging by TMTG’s own financial reporting and all public knowledge about the company.

Trump’s comments about TMTG’s financial position recall a similar incident with a mercurial public figure at its center. In 2018, the Securities and Exchange Commission brought charges against Elon Musk after the CEO of Tesla Inc. made what the agency deemed “false and misleading tweets” related to a potential take-private deal for the automaker. The comments, in which Musk said funding had been secured to take Tesla private at $420 per share, preceded a surge in pricing of the company’s stock.

Musk later claimed the tweet referred to promises made to him in conversations with Saudi Arabia’s sovereign wealth fund. Per the terms of his settlement with the SEC, Musk had to relinquish his executive chairmanship at Tesla and pay $40 million in penalties.

Does a similar fate await Trump? That might depend on the rationale behind his characterization of TMTG’s financial position. However, if Trump does sidestep a reckoning this time, he may find himself back in this same position soon enough. Ask E. Jean Carroll about Trump’s ability to stay quiet in the face of dire consequences. If hundreds of millions of dollars in fines won’t keep him from crossing the line, what will?