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Inside the Trump Meme-SPAC Clown Car

As a business, the DWAC-TMTG merger is full of red flags: peripatetic sponsor, nonexistent product, outrageous valuation. But a mysterious bulk order, made just before the merger announcement sent the stock flying, may be the most telling market signal of all.

Just when you thought Donald Trump had no more outrageous tricks up his sleeve, he delivers his latest stunner: the proposed merger of a fantasy social media company—what he is calling Trump Media & Technology Group—with Digital World Acquisition Corp., a SPAC, or special purpose acquisition company, started in September by Patrick Orlando, a former JPMorgan & Co, Deutsche Bank emerging-markets derivatives trader, and Luis Orleans-Braganza, a member of Brazil’s National Congress, representing San Paolo. The 22-page investor deck, published on the TMTG website, promises a social media app to compete with Twitter and Facebook; a news and streaming platform to rival CNN and Netflix; and a “tech stack” to compete with Google Cloud and Amazon Web Services.

This one has stinker written all over it. But not to Trump’s adoring throng, who don’t realize they are being fleeced and can’t get enough of the opportunity to invest alongside a man who has already taken a handful of his other companies through bankruptcy court. Since the news of the merger between DWAC and TMTG broke on Wednesday, DWAC’s stock has gone from just under $10 a share—representing the net asset value where most SPACs seem to be languishing these days until they announce deals—to around $94 a share, an increase of around 850 percent in two days. (The DWAC stock spent a fleeting moment at $175 a share; pity the fools who bought at that price.) Time will tell, of course, but TMTG could turn out to be the most meme-y meme stock of all time, out-memeing AMC, GameStop, and Hertz for greatest meme stock ever.

So, just what the hell is going on here? Nothing good, that’s for sure. A little over a month ago, Orlando and Orleans-Braganza raised $293 million in the I.P.O. of DWAC. That’s pretty standard these days. So far in 2021, some 489 SPACs have raised more than $135 billion, according to SPAC Insider, a SPAC trade publication. DWAC is just one of many such shell corporations given a blank check by investors to try to seek out and close a merger. 

It turns out that Orlando, an M.I.T. graduate who is based in Miami, is a serial sponsor of SPACs with strange names. There’s Yunhong International, which went public in February 2020 and raised $60 million (this is a weird one, with a business address in Wuhan, China, and all sorts of strange doings, but that’s for another day); Benessere Capital Acquisition Corporation, which went public in January and raised $100 million; and Maquia Capital Acquisition, which went public in May and raised $160 million. None of these three SPACs have yet consummated deals, even though they completed their I.P.O.s before DWAC; all three of these stocks have risen slightly in recent days, as Orlando became better known. (In May, Yunhong International made a deal—reportedly valued at $7 billion—to buy Giga Carbon Neutrality, Inc., a maker of hydrogen fuel cells and advanced batteries for the automotive industry, but failed to close it; the deal was terminated in September, according to a press release from Orlando.) 

Orlando is peripatetic, if nothing else. According to his Linked In page, after graduating from Sidwell Friends School, in Washington D.C., Orlando got a bachelor of science degree in engineering from M.I.T., graduating in 1994, and an M.B.A. from there in 1995. After a stint as an equity research analyst at a bank in Lima, Peru, Orlando spent nearly three years as an emerging-markets derivatives trader at JPMorgan. In October 1998, he apparently moved on to Deutsche Bank, where he spent the next five years, also as a derivatives trader. (For what it’s worth, Orlando’s employment history, as filed with FINRA, Wall Street’s self-regulating organization, puts his time at Deutsche Bank at a little more than two years, from December 2001 to March 2004.) Orlando’s resume has many odd entries: five years spent as chief technical officer and head trader at PURE Biofuels; more than four years as chief financial officer of SucroCan Sourcing, a Coral Gables, Florida-based sugar trader; the managing director of something called BancTrust & Co., in Miami and as a Managing Director of another something called Entoro Securities, also in Miami. His FINRA records also mention a six-year stint at something called Stillpoint Capital, a small investment banking firm based in Tampa, Florida, which is not mentioned on his LinkedIn resume. There are also six years as a “business developer” for Neoturf Systems, in Dalton, Georgia.

Whatever his background, it seems to have been good enough to raise hundreds of millions of dollars in SPACs. Orlando is also the “managing member” of ARC Global Investments II, which sponsored DWAC. Like many SPAC sponsors, ARC Global paid a grand total of $25,000 for its 8.6 million DWAC shares. Thanks to the Trump mob, Orlando’s shares in DWAC are now worth around—wait for it—$808 million! (His shares are subject to a six-month lock-up period, brief by SPAC standards, but are free to be sold after the consummation of the merger with TMTG. When DWAC was trading briefly at $175 a share, Orlando’s stock was worth $1.5 billion.) None of this is particularly unusual by the standards of the wacky SPAC market: Orlando appears to have Wall Street credentials as a derivatives trader and used them to organize four small SPACs, which together have raised more than $600 million. Only in America, I suppose. 

The weirdest thing about DWAC is that the sole underwriter of its nearly $300 million I.P.O.—as well as the financial advisor on the proposed acquisition of TMTG—was E.F. Hutton. But this E.F. Hutton is not to be confused with the infamous brokerage firm E.F. Hutton, which got caught in a check-kiting scandal in 1985 and was sold to what became Lehman Brothers, for $1 billion, in 1987. (Its tagline, pre-scandal, was “When E.F. Hutton talks, people listen.”) This new E.F. Hutton is a division of something called Benchmark Investments, LLC (formerly Kingswood Group), and was founded in May 2020 as a middle-market investment bank. Needless to say, DWAC and the new E.F. Hutton were destined for obscurity until they somehow connected with the latest Donald Trump folly.

How Patrick Orlando and Donald Trump found each other remains a mystery. But Orlando must be thrilled he did. “Digital World was formed to create public shareholder value and we believe that TMTG is one of the most promising business combination partners to fulfill that purpose,” he said on October 20. He added that the company’s $293 million—currently held in trust and subject to shareholder redemptions at $10 a share, which is unlikely with the stock trading around $94 per share—can be used to “fuel” the “scale up” of TMTG, including to provide “world class leading technology services to build strong and secure social networks and diverse media offerings. Given the total addressable market and President Trump’s large following, we believe the TMTG opportunity has the potential to create significant shareholder value.” He’s been right so far about that, although we’re only a few days in. Of course, Orlando was several months into the Giga deal before it got terminated, so there’s plenty of time for the deal with Trump to fall apart, scorching retail investors along the way.

As usual, though, the real alchemy in this deal lies with Trump and his fantasies. According to the press release on tmtgcorp.com, dateline Palm Beach, Florida, Trump is already valuing TMTG at an “initial enterprise value” of $875 million plus the potential to earn-out another $825 million in additional TMTG shares, for a total potential grift of $1.7 billion. So far, Trump has provided no projections, or any basis whatsoever for the $1.7 billion valuation. Like so much of The Donald’s boasts about his net worth—-which ranged during the 2016 presidential campaign between $10 billion and $11 billion, but which Forbes estimates now at $2.5 billion, removing him from the Forbes 400 list for the first time in 25 years—the $1.7 billion seems to be pretty much fiction, at least at the moment. If he actually intends to consummate the merger with DWAC, he will have to share credible projections for TMTG with his investors. 

That will not be an easy task for Trump, who has barely a shred of credibility left with most professional investors or Wall Street intermediaries. At the moment, TMTG is literally nothing more than words on paper. His “TRUTH Social” app is available for “pre-order” from the Apple app store now. In November, TRUTH Social will begin its “beta launch” for “invited guests.” (Hah!) A “nationwide rollout” is slated for the first quarter of 2022. There is supposedly a plan to have a video-on-demand service under the leadership of Scott St. John, an executive producer for the game show Deal or No Deal. (Natch.) Until then, there is only the Trump bluster. “I created TRUTH Social and TMTG to stand up to the tyranny of Big Tech,” he wrote on the website. 

What’s not bluster, or at least not yet anyway, is the amount of money that people have made (and lost) in the last two days trading the DWAC stock. A Wall Street friend writes that just prior to the October 20 announcement of the merger with TMTG, around 305,000 DWAC shares were purchased at 11 a.m., at a price of $9.97 a share. My friend figures that at the moment when DWAC was trading at $175 a share, whoever bought the 305,000 shares was sitting on $53 million—at least $50 million of which was profit after two days—and probably would have been inclined to sell shortly thereafter. Such is the herky-jerky, wildly unpredictable nature of the meme market, which seems to continue to defy any logic. And that’s just one example of the millions of shares of DWAC that changed hands in the past few days, including those sold by some investors, such as hedge fund manager Boaz Weinstein, who wanted nothing to do with a Trump-related deal.

Could some Trump adjacent agents have bought some DWAC stock “through his minions or straw dogs,” as my friend suspects, and sold high? I highly doubt it—even Trump and his inner circle would know better than to tempt Gary Gensler’s S.E.C., especially when the Trump Organization is already being investigated in New York City and New York State. The real scandal, anyway, is the one involving the poor saps who are buying up the DWAC shares in a $3 billion frenzy and who have somehow forgotten that this latest example of Trump vaporware, like many other Trump schemes—from the XFL to the Trump Taj Mahal to Trump “steak” and Trump University—seems bound to part fools and their money in short order.

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