Topline
Insiders at Dominari Holdings, along with Donald Trump Jr. and Eric Trump, secured 1 million shares through a private placement and bonuses right before the stock price skyrocketed following the announcement of the Trump brothers joining the advisory board. Filings indicate that the timing, while likely not in violation of insider trading laws, prompts scrutiny regarding whether the directors acted in the best interests of the company by offering shares at discounted rates to themselves.
Donald Trump Jr. and Eric Trump smile during the Republican National Convention in Milwaukee in July … [+]
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Key Facts
On February 10, the CEO, COO, president, and four other board members of Dominari Holdings Inc.—a Nasdaq-listed company focused on wealth management, investment banking, sales and trading, asset management, and capital investment—acquired a total of 664,000 shares via private placement, paying $3.47 per share, as revealed in Securities and Exchange Commission filings.
Each share came with two warrants, permitting the insiders to purchase additional shares at $3.72 and $4.22 each over the following five years.
On the same day, the company granted six insiders (five of whom participated in the private placement) a total of 402,000 shares as bonuses.
The following day, one hour before the stock market opened, Dominari Holdings revealed that Donald Trump Jr. and Eric Trump had joined its advisory board and had already acquired an undisclosed number of shares in the private sale—news that propelled shares to a 52-week high of $11.33 that day and peaked at $13.58 two days later.
In filings with the SEC dated February 24, the Trumps disclosed specifics about their stakes: each owns 966,000 shares in the company, representing 6.7% of its outstanding shares, and holds warrants for an additional 432,000 shares.
Inquiries made to Donald Trump Jr., Eric Trump, and various insiders at Dominari Holdings went unanswered.
Is This Insider Trading?
Likely not. According to Allan Horwich, a law professor at Northwestern University with over 40 years of securities litigation experience, “As a general rule, if a company sells stock directly to someone (private placement), where the buyer is informed of all material facts regarding the company, there is no insider trading violation or other securities fraud.” He also noted that in the absence of open market trading, no harm would come to uninformed traders, negating insider trading violations.
What To Watch For
Horwich further explained that aside from securities laws, selling shares too cheaply could indicate a breach of fiduciary duty by the directors who approved the sale. This could lead to claims where a stockholder must pursue a derivative claim on behalf of the company against directors for causing damage by underselling shares. However, due to Dominari Holdings’ small market cap, it may not be an appealing case for plaintiffs’ attorneys.
Future SEC filings could provide more insight into the Trumps’ holdings and whether any insiders capitalized on the increase from the Trump announcement to divest their shares. Currently, none have reported selling, but they might be temporarily restricted from doing so. “Various regulations could prevent the directors from re-selling the private placement stock for at least six months,” noted James Park, a UCLA law professor focusing on securities regulations. “It’s also possible that they committed to holding the shares longer than six months, which would lessen the risk of unjust enrichment as they cannot immediately sell to benefit from market responses.”
Crucial Quote
Adam Pritchard, a corporate and securities law professor at the University of Michigan, remarked, “The announcement [regarding the Trump’s involvement with the company] immediately following [the private placement] is unusual. While it is not uncommon for insiders to provide financing, the simultaneous disclosure with the private placement is rare.”
What We Don’t Know
The Trumps’ SEC filings do not indicate when they began acquiring shares, how they obtained all their shares (whether through public market purchases, private placements, or compensation for their advisory roles), or the price they paid. However, it is evident that at least some shares were acquired in a private sale, as per a company press release.
It seems likely that Donald Trump Jr. and Eric Trump received shares aligned with their positions on the advisory board. The SEC filing from February 12 mentioned that advisory board members receive an unspecified number of shares upon joining and additional shares as the company’s market capitalization reaches $50 million, $100 million, and $150 million. Since the company’s market cap exceeded $50 million and $100 million in February following the Trump announcement, it’s likely the brothers received extra shares during that period.
Surprising Fact
There is minimal public record of Dominari Holdings’ advisory board prior to the announcement of the Trump brothers’ involvement.
Tangent
Trading volume for Dominari Holdings surged in anticipation of the February announcement regarding the Trumps’ stakes in the company and their advisory roles—a spike some securities law experts deemed “suspicious.”
Big Number
$747,000: The amount Dominari Holdings reportedly pays the Trump Organization annually for its office space in Trump Tower, according to independent journalist Wendy Siegelman, citing SEC filings.
Forbes Valuation
As of November 2024, Forbes estimated Donald Trump Jr.’s net worth to be $50 million, with Eric Trump valued at around $40 million.
Further Viewing
Further Reading
Trump’s Sons Invest In AI Data Centers After He Touts Billions In Industry Expansion (Forbes)
Trump Media Paid Donald Trump Jr. Nearly A Quarter Of Its Annual Revenue. He Attended Just Two Board Meetings (Forbes)
Donald Trump Jr. And Eric Trump Deny Involvement With Fraudulent Statements In Testimony—Though Evidence Suggests Otherwise (Forbes)
How Donald Trump Shifted Kids-Cancer Charity Money Into His Business (Forbes)
After Promising Not To Talk Business With Father, Eric Trump Says He’ll Give Him Financial Reports (Forbes)
