Trump News Helped Fund Reap Gains From Share Sales

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, podcasts, radio, news.

**SPEAKER_2** (0:08)
You're listening to Bloomberg Businessweek with Carol Massar and Tim Stenovec on Bloomberg Radio.

**Carol Massar** (0:16)
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. Here to explain this more, Bloomberg News reporter Zachary Mider.

**Tim Stenovec** (0:38)
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?

**Carol Massar** (0:45)
The first question I wrote was, huh, huh, what?

**SPEAKER_2** (0:48)
Right, right.

**Zachary Mider** (0:49)
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.
And sometimes they're not a lot more than just kind of a 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. And 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. So 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.

**Carol Massar** (2:09)
So they're not in it for the long term. They're getting out. What does that mean for the investors or for the companies themselves?

**Zachary Mider** (2:16)
Well, hopefully, golf courses and drones is a great idea.

**Tim Stenovec** (2:21)
I mean, it's just legal?

**Zachary Mider** (2:24)
There's been no allegation that anyone misrepresented anything here. But what we found in these deals is that the Trump name gets a lot of attention to what would otherwise be very small. These are not stocks that folks like you are talking about every day on the Earth.
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.

**Carol Massar** (2:51)
And then it gets eyes. I mean, because the ARIS, I'm not sure if that's how you say it, 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. Is the assumption here without 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 US government, like this will help them win contracts.

**Zachary Mider** (3:17)
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, 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.

**Tim Stenovec** (3:48)
And so the Trump family is saying there is no conflict of interests.

**Zachary Mider** (3:52)
Yeah. Well, not only is there no conflict of interests, 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 even investing in all, in every deal this fund does.
They're saying, we're just sort of along for the ride like any other investor.

**Carol Massar** (4:13)
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. There's no promise of anything illicit so far.