The Spac that made Donald Trump rich again

One scoop to start: The owners of boutique hotel chain CitizenM are working with bankers to explore options for the business, including a potential sale, as it seeks to expand following a rebound in the travel sector post-pandemic.

In today’s newsletter: 

• Trump’s Spac riches take shape

• Sullivan & Cromwell faces FTX fees

• Adam Neumann’s new WeWork deal

Donald J Trump goes public and makes billions

Just one week ago, Donald Trump was sending warnings that he might have to get rid of assets at fire sale prices to cover a $464mn fraud judgment in New York during his appeal.

On Tuesday, the former president added more than $4bn to his net wealth after his latest venture Trump Media & Technology Group made its public markets debut.

Life comes at you fast but it’s important to remember that those are just paper gains and Trump is unlikely to be able to offload any of his stake until the six-month lock-up period ends. Not to mention that any selling from him could tank the company’s stock price. (Here’s what our colleagues at FT Alphaville have to say.)

In the process of making himself fabulously wealthy, Trump has also enriched some of his former allies-turned-adversaries, at least theoretically. 

DD’s Antoine Gara and Ortenca Aliaj ran the numbers on the odd cast of characters who banded together to make the listing happen and earned themselves a payday that even most people on Wall Street could only dream of.

Patrick Orlando, the Miami-based businessman who set up the special purpose acquisition company that merged with TMTG, has a stake worth about half a billion dollars. Not bad for a guy who worked out of a WeWork office, was unceremoniously ousted as chief executive of the Spac he set up, and recently sued the company. 

It might seem like a kick in the teeth for Eric Swider, the new CEO of the Spac, who got the deal over the line. His $30mn stake is a fraction of what Orlando stands to receive, but on the bright side his payout would be in line with CEOs of big banks such as Goldman Sachs and Citigroup. 

Two former contestants on Trump’s reality TV show The Apprentice, who claim they came up with the idea of setting up TMTG together, have stakes worth about $436mn. Their partnership, United Atlantic Ventures, has also sued, alleging that Trump and his associates had orchestrated a “last-minute stock grab” before TMTG listed.

Then there are the former officials in Trump’s orbit who have stakes worth a few million dollars, including Devin Nunes, a Trump ally and former congressman who left office in 2022 to lead TMTG.

One group that may be able to exit faster than anyone else is the three hedge funds that helped finance the final push for the listing. Mangrove Partners, Anson Funds and All Blue Capital are sitting on nine-figure windfalls and will be able to sell as soon as a registration statement is filed by the Spac. That typically happens within 90 days but they can push for it to happen sooner, if necessary.

Some of the funds have put on “dirty hedges” to protect windfalls as big as $200mn. Hedging, however, is expensive. One fund lost $10mn on its hedges on Tuesday, sources told DD. 

“We are losing real money and making fake money,” said the person, though they nonetheless saw the gains on Tuesday as a “great outcome” as millions of shares traded.

For the rest of the current and former executives involved in the Trump Spac, as well as the man himself, it will be six long months of sitting and praying that the share price holds up.

Ultimately, they are all sitting on “a game of musical chairs”, said the person involved. “At some point the game will end.” 

Sullivan & Cromwell feels the heat in FTX bankruptcy

John Ray, the emergency chief executive of FTX, famously described the crypto exchange he took over as a “dumpster fire”. Should Sullivan & Cromwell have seen the sparks? 

The powerful US law firm had been cosying up to Sam Bankman-Fried for months in advance of the implosion of FTX in November 2022. S&C lawyers were conveniently on the scene when the run on accounts brought down the crypto trading giant.

The firm then helped shepherd the emergency bankruptcy filing and the bringing onboard of Ray. Quickly, it also got the debtor’s assignment in the FTX bankruptcy and has since billed nearly $200mn in fees to the estate.

Now, S&C’s ongoing presence at FTX, a long-simmering point of contention, has been openly subjected to harsh criticism from eminent voices. Two veteran law professors, Jonathan Lipson and David Skeel have written a paper that concludes that S&C’s “apparent conflicts of interest permeated FTX’s bankruptcy filing and every aspect of the case” and that “S&C knew, or was in a position to know, that FTX was co-mingling customer assets”.

These are just some of the incendiary charges that the academics make, as DD’s Sujeet Indap described in an FT news story. For his part, Ray has fired back at the ivory tower duo, describing their work as “uninformed and unsupported allegations”.

The paper is set to be published in the law review of Stanford Law School, the same institution where Bankman-Fried’s parents happen to be professors. Lipson told the FT he spoke to Bankman-Fried and his mother on a “number of occasions”. 

“Candidly, I was pretty sceptical of Bankman-Fried’s claims at the time, and it was only after a fairly sustained effort of putting pieces together — some from them, but most in public — that it came to appear that S&C may have some problems,” he added.

Adam Neumann plots his return to WeWork 

For weeks, DD reporters have been hearing about former WeWork chief executive Adam Neumann’s fundraising efforts to swoop in and buy the company out of bankruptcy. Financial titans including Dan Loeb’s Third Point and Seth Klarman’s Baupost Group were among the firms that held initial talks with Neumann late last year.

Neumann’s back for a second swing. This week, he wrote another letter to the co-working group with a conditional offer of about $600mn for the company.

Now, a new name has entered the mix. Rithm Capital — the firm that won out in the battle to buy Sculptor Capital last year — is in talks to be one of Neumann’s potential new financing partners this time round, two people familiar with the matter told DD.

A spokesperson for Neumann and his new real estate venture Flow declined to comment, and referred to an earlier statement indicating he’s amassed “a coalition of half a dozen financing partners”.

In a letter to the company last month, Neumann leaned into the name dropping. He mentioned Third Point as a partner, even though the hedge fund shortly after distanced itself from the potential bid, insisting its talks with him were only “preliminary”.

Even though the bid’s preliminary, Neumann’s overtures seem to be building up. On Monday, his attorneys at Quinn Emanuel filed a request to appear in court during WeWork’s bankruptcy proceedings. (The lawyers also represent Flow, according to the court filing.)

This item has been amended to reflect that Rithm Capital and Adam Neumann are holding financing discussions

Job moves

• NatWest Group’s chief legal officer and general counsel, Gideon Moore, and its director of strategy and corporate development, Matt Austen, have both left the firm as it prepares to sell shares to retail investors.

Smart reads

‘Starkly fraudulent’ An unsuspecting plot of barren land outside Edinburgh was leveraged in a £5bn crypto fraud scheme, the FT reveals.

Musk’s Starlink SpaceX’s satellite-enabled internet service, Starlink, is available almost anywhere on Earth. That’s made it a hot commodity for the black market, Bloomberg reports.

Peak private As interest rates stabilise, public credit markets are booming again, the International Financing Review writes. Will that spell the end for private credit’s golden era?

News round-up

Larry Fink warns retirement crisis looms for ageing world population (FT)

US faces Liz Truss-style market shock as debt soars, warns watchdog (FT)

International Paper’s takeover move raises possibility of bidding war for DS Smith (FT)

CBI admits to using non-disclosure agreements to silence staff (FT)

Visa and Mastercard agree $30bn settlement over US transaction fees (FT)

Bertelsmann would consider deal to expand music business BMG, says chief (FT)

EY drops appeal against German sanctions over Wirecard audits (FT)