Barry Grossman, one of the lawyers involved in a special purpose acquisition company (Spac) that seems set to create a windfall profit for its sponsors and Donald Trump, highlights a role helping Chinese companies to list in the US among his business achievements.
That particular line of fee generation is dormant at the moment after China effectively banned new US listings by its companies, a personal goal that Trump failed to achieve while he was in office.
But Spac structuring is the sector that just keeps on giving for insiders, as the deal for Trump’s new media group demonstrates.
Grossman boasts that his firm has been involved in over 200 Spacs, which have raised more than $3 billion, and also touts his experience with the private investment in public equity (Pipe) commitments that have become key to closing many acquisitions by Spacs.
The announcement that Digital World Acquisition Corporation intends to take Trump Media and Technology Group (TMTG) public did not include any reference to Pipe funding.
That didn’t stop the Spac soaring after its deal with Trump was announced, however. Digital World saw its value rise by roughly 900% as Trump followers and day traders (including Trump-following day traders) bought its shares following the October 21 announcement.
As is often the case with Spacs – and indeed many of Trump’s business ventures – it was not clear how gains in the deal will be split
Even after the shares retreated in the following week, there was still a paper profit of over $400 million for its sponsors and the shareholders in Trump’s new venture.
As is often the case with Spacs – and indeed many of Trump’s business ventures – it was not clear how gains in the deal will be split.
The lack of numbers for the projected value of Trump’s new venture and its planned social media platform – to be called TRUTH Social – was notable, even by the undemanding standards of Spac disclosure.
Trump made a personal announcement on Reddit the week after the Spac launch that failed to add much detail, although he mentioned a potential on-demand streaming service and added: “TMTG also sees opportunities to create ‘cancel-proof’ alternatives ranging from web services to payment processing.”
America’s technology and financial services firms can consider themselves warned.
Curious ties
Grossman is a New York-based lawyer, but the main players in the Trump Spac are based in Florida, including Patrick Orlando, the creator of Digital World, along with multiple other shell vehicles.
Orlando is generally described as a former Deutsche Bank derivatives trader, which is technically true, although he actually got his break after a brief stint as an analyst when he landed a job in emerging market derivatives at JPMorgan.
That was the springboard to five years at Deutsche, where he was a director – a relatively junior position given that most successful traders and structurers are given the title of managing director.
Orlando’s LinkedIn profile details a succession of jobs and business ventures after he left Deutsche Bank in December 2003, many of them short lived. Orlando’s current roles include chief executive of Yunhong International, a Spac with an office in Wuhan that recently abandoned a planned merger with a Chinese energy firm.
The curious ties to China are among the many intriguing aspects of the latest Trump business venture and may prolong the longstanding refusal of most mainstream Wall Street firms to get involved with financing his projects.
Many hedge funds that held shares in Digital World as part of their policy of buying into multiple Spacs to hold an option on deals decided to sell as soon as the link with Trump was announced.
However, that bout of moral reflection – or calculated reputational risk management – came at a financial cost after the Spac price jumped.
If Trump’s new media venture develops momentum, some Wall Street players will be sorely tempted to bid for some of the associated gains.
