Selling swamped the stock of Trump Media & Technology Group all week, dropping it 25% as traders tried to get ahead of Friday’s expiration of insider lockup agreements. Yet the company’s biggest shareholder, Donald J. Trump, had said he wouldn’t sell.
“I have absolutely no intention of selling,” said the former president at a campaign press conference on September 14.
“A lot of people think that I’ll sell my shares,” Trump said. “I mean, they’re worth billions of dollars. But I don’t want to sell my shares. I’m not going to sell my shares. I don’t need money.”
We Americans don’t take every presidential campaign promise at face value—but statements about stocks, we take seriously. Trump’s comment lifted Trump Media stock that day by 12%, with such strong moves that Nasdaq halted trading twice.
Trump owned 57.3% of Trump Media, as of its September stock prospectus. Since mid-June, the stock has slid from around $35 to $13.55, shrinking the value of his holdings from about $4 billion, to $1.6 billion. That kind of volatility would tempt an insider to cash out some stock, when a lockup expiration permitted.
So we asked securities law professors whether Trump’s press conference statements bound him, in any way, from selling his unlocked shares. If he sold stock on Friday, or next week, could he be held to account?
Trump’s statements certainly weren’t enforceable under contract law, said Robert Bartlett III, a professor of law and business at Stanford Law School. The former president’s press conference remarks weren’t accompanied by the formalities that made the lockup agreement binding.
But securities law might have something to say if Trump didn’t mean it when he said he had “no intention of selling.” That would make it a misstatement, under securities fraud laws, said Bartlett. And given how much Trump Media stock moved after the Sept. 14 press conference, a plaintiff could argue that the misstatement was “material.”
A sale by Trump on Friday would be an easy case, said Adam Pritchard, a University of Michigan law professor who’s written extensively on securities regulation.
‘If he sold today, would be fraud,” said Pritchard on Friday. “The chance of lawsuit would be exceedingly high and even the SEC might decide it was worth a lawsuit.”
But Trump didn’t say he intended to hold his stock forever. If Trump starts selling stock some weeks from now, it becomes harder to argue that his statement was false, said Pritchard.
When the former president sells stock, both he and Trump Media are obliged to disclose it. Securities regulations require the filing of a Form 4 notice within two days of a transaction by anyone holding more than 10% of a stock. Trump would have to sell a lot of stock before he falls below that threshold.