The idea sounds simple enough. Find a down-on-its-luck company that’s already listed on a stock market, and smash it together with a start-up in need of quick money. It’s a shortcut to a major cash infusion, without the paperwork of an I.P.O. or the hassles of dealing with venture capital investors. The results can be a little odd.
Between the two of them, Don Jr. and Eric Trump own about 11 percent of Dominari Holdings, and they serve on the company’s advisory board. Its president, Kyle Wool, is a frequent booster of the president on the Fox Business channel. When the impending merger was announced (“Trump Sons Back New Drone Company Targeting Pentagon Sales” was the headline in The Journal), the golf course company’s shares shot up 24 percent intraday. The number of shares traded jumped from around 24,000 to over 28 million in a single day. The fact that a Trump-backed company could be selling drones to the Trump administration wasn’t a bug; it was a feature. In fact, that feature seems to have been a selling point to a certain kind of investor.
Mr. Evans, from Unusual Machines, compared the Trump brothers coming on board to when Oprah Winfrey joined Weight Watchers, but it’s more than that. Buying into these companies offers people a chance to affiliate themselves with emerging technology, MAGA celebrities and Trump-adjacent businesses all at the same time. The Financial Times recently noted that a vast majority of companies backed by Dominari and 1789 — neither of which commented in response to questions from The Times — are in sectors aligned with Trump administration priorities.
Brett Velicovich, the president of Powerus, the merged golf course-drone company, told me in the spring that it would compete on merit, not connections. “With the way that the Department of War works, there are multiple layers of oversight,” he said, adding that it “would be virtually impossible for someone to make a call, and all of a sudden: a contract.” In June, Unusual Machines announced a $30 million equity investment in Powerus. In August, one of Powerus’s subsidiaries received the company’s first major Pentagon contract, a funding line worth up to $90 million from the U.S. Air Force. As Pentagon contracts go, that’s a pittance, but it’s a lot of money for a start-up.
Dominari Securities helped engineer lots of other reverse mergers, each more improbable than the last. The company achieved a mash-up of a crypto business with a company that makes sea otter plushies, another of a drone software company with a construction company known for the hundreds of waxing salons it’s built.
Then there’s the tungsten-mining operation in Kazakhstan. The Trump administration had given its preliminary OK to $1.6 billion in financing when it announced a merger with Skyline Builders. That’s a Hong Kong-based engineering company that previously went public with the help of none other than Dominari Securities.
Separately, Trump Media, which runs the Truth Social platform, is combining with a nuclear fusion firm. Seriously. Yes, this seems like some kind of MAGA Mad Lib. But we’re in an age of absurdity on Wall Street. Allbirds, the shoe brand, recently announced it was becoming an A.I. company. The princelings didn’t build this madhouse, but they seem to be making themselves very much at home in it.
These shell-company deals, which have historically been riskier than traditional I.P.O.s, fell out of fashion on Wall Street for a while. They have been making a comeback, though, and these princeling-connected deals are a part of it.
The entrepreneurs joining these deals aren’t necessarily MAGA. Often, their businesses just need the money, and right now the oligarchy is flush. “Unfortunately they are so far-right,” one chief executive told The Journal, speaking of his new partners. But now “we’ve got the capital we need.”
Many of these deals have turned out rather well for Dominari Securities and its American Ventures fund. Take those Kissimmee golf courses. After the fund put in $26 million, its holdings in the mashed-up golf course company are worth around 10 times as much. As for the everyday investors who bought in — well, they didn’t do so great. Powerus, the golf-drones combo, is down almost 70 percent since its merger was announced. Dominari Holdings’ chief executive has rejected any suggestion that his company improperly manipulated share prices, or that shareholder losses were evidence of anything other than normal market fluctuations. “Do stock prices rise and fall?” he asked Bloomberg. “Of course they do.” But that same pattern, of a sharp rise in value followed by a steep decline, played out in one Dominari-arranged merger after another after another. [...]
The last time American oligarchs were this brazen was at the end of the 19th century. Their power was immense, and they weren’t afraid to show it, whether by openly buying a Senate seat or persuading the president to help them corner the gold market.
“It provoked a backlash,” said Professor Winters, the author of “The Blind Spot: How Oligarchs Dominate Our Democracy.” “That backlash lasted decades.” He ticked off a series of reforms that resulted: the progressive income tax, and its radical idea of asking more from the rich; the Sherman Antitrust Act, which broke up the biggest oligarchs’ biggest source of wealth; the direct election of senators, which undercut the oligarchs’ ability to pick the nation’s most influential legislators; the rise of organized labor. There’s a reason the oligarchy retreated behind the hedgerows for the next century or so. [...]
America is by no means headed for changes of this scale. But it’s become increasingly clear that Americans are grossed out by the magnitude of self-enrichment in and adjacent to the Trump administration. In a late October poll, CNBC found that corruption was now the top issue on midterm voters’ minds. In a recent Gallup poll, 89 percent of all Americans surveyed said government corruption was widespread — a consensus almost unimaginable on any other topic. Investors have lost an estimated $3.8 billion on Mr. Trump’s crypto coin.
by Noah Shachtman, NY Times | Read more:
Image: Brandon Celi
