Trump News Helped Fund Reap Gains From Share Sales

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1:13What's that look like? Cheaper prescriptions that are easier to get and care that looks at the whole person how you need it. Optum is helping make healthcare work as one for everyone. Learn more at business.optum.com. Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to Bloomberg Businessweek with Carol Masser and Tim Stenevek on Bloomberg Radio. One Monday in March, a small golf course operator announced it was merging with a wait for it drone maker. Odd, yes, but not likely to draw a ton of attention except for one detail. The merger was backed by an investment firm to do with Eric Trump and Don Jr.

2:01Here to explain this more, Bloomberg News reporter Zachary Meider, thanks for coming back here to Bloomberg Businessweek Daily. Okay, you have to explain this. I mean, investors jumped on board. What's going on? Yeah, the first question I wrote was, huh, huh, what? Right, right. So you see this a lot in the kind of weird corner of the market that the Trump sons, Don Jr. and Eric Trump, are operating in. They're working with an investment bank that they own a stake in called Dominary that does a lot of work with like these what you call micro cap companies. These are like companies that often don't have any profit or even revenue.

2:37And sometimes they're not a lot more than just kind of an empty public shell of a company. And so one of the things that they sometimes do is they'll take a company that doesn't have a lot of prospects but has a listing and then merge it with another thing that sounds more exciting. Like drones. Exactly, like drones, which are sort of hot right now. Right. And so what our story was that we published today looked at what is this fund actually doing? Because by publicizing the Trumps involvement, it kind of sounds like that's a boost, a vote of confidence in the future of these businesses. But the fund, what we found in these four deals that we highlighted was actually selling.

3:18So like when they announced the merger and said the Trumps were involved, the first time anyone heard that the Trumps were involved, they were actually selling stock that day. They sold six million of stock. So at the same time they were bringing retail investors in to buy, they were actually reducing their position in the company. And they did that a few times. So they're not in it for the long term. They're getting out. But what does that mean for the investors or for the companies themselves? Well, I mean, hopefully golf courses and drones is a great idea. I mean, is this legal? There's been no allegation that anyone misrepresented anything here.

3:53But what we found in these deals is that, you know, the Trump name gets a lot of attention to what would otherwise be very small. These are not stocks that folks like you were talking about every day on the air. They're very small market cap and not a lot of profit or revenue. And so this is an opportunity to sort of get some retail attention for them. And then it gets eyes. I mean, because the the Ares, I'm not sure if that's what you say, but this golf company that then became a drone company or merged with a drone company, the shares changed hands more in one day than the previous six months combined.

4:30Is the assumption here without, you know, alleging any wrongdoing, people look at the association with these two Trump sons and think, oh, this will help them get more business either at the Pentagon or with the U.S. government like this will help them win contracts. Right. Yeah. And in fact, a lot of the discussion about these deals is like, well, would that be a conflict of interest? Is that a bad thing to have happen? But in another sense, if you take a step back and look at it, you know, the investment funds have already done pretty well on some of these deals, even without any intervention from the Trump administration or the Trump family, just because they've been able to use the name to get attention for these very small stocks.

5:15And so the Trump family is saying there is no conflict of interest. Yeah. And well, not only is there no conflict of interest, the Trump sons, Don Jr. and Eric have said, look, we're just passive investors in this fund, which is true. They're not the ones making the investment decisions here. And they're not and they're not even investing in all in every deal this fund does. They're saying we're just, you know, we're just sort of along for the ride like any other investor. What is the bigger picture issue here? I mean, it doesn't look great on its face, but as you say, there's no laws being broken.

5:47There's no promise of anything illicit so far. But is, I mean, is there long-term ramifications of this kind of behavior for somebody that's closely associated with the government or maybe not? Well, I think this is a part of the market that's had these kinds of concerns for a long time, the kind of microcap marketplace. It's not uncommon at all to see investors lose money as they have in the deal. You know, the stocks have kind of gone down since these announcements in the deals we wrote about. So that part's not uncommon. And it's kind of par for the course with a lot of micro-cap stocks because, you know, these are just, it's almost like a venture capital investment where, you know, most venture capital deals don't work out.

6:30I was going to say, why keep investing in them? Is it because you're banking on that one to hit big that one time? That's what people hope for is that this one's going to go to the moon. I have to say, it seems kind of similar to Trump's investments in cryptocurrencies. Is it? There's a parallel. It looks like the Trump family has done pretty well on its crypto investments when some of the outside investors who bought into those cryptocurrency transactions didn't do as well. So that's a parallel. What are you covering next? What are you digging into next? What do you got for me? I don't know. I'll send you some notes.

7:06All right. And Sagar Meiter, thank you so much. The article is up now on the terminal and anywhere you get your Bloomberg-y news. We appreciate it.

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