Topline
Insiders at Dominari Holdings, along with Donald Trump Jr. and Eric Trump, acquired 1 million shares via a private placement and bonuses right before the stock price skyrocketed following news of the Trumps joining the advisory board. Experts indicate that while this timing likely doesn’t breach insider trading laws, it casts doubt on whether the directors acted in the company’s best interests by selling shares at reduced prices 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—collectively acquired 664,000 shares through a private placement at a price of $3.47 per share, as documented in SEC filings.
Each share was accompanied by two warrants, granting the insiders the option to purchase additional shares at prices of $3.72 and $4.22 over the next five years.
On the same day, the company also granted six insiders (five of whom partook in the private placement) a total of 402,000 shares as bonuses.
The following day, just before the stock market opened, Dominari Holdings announced that Donald Trump Jr. and Eric Trump had joined its advisory board and had already acquired an undisclosed number of shares in the private placement—this news drove the stock price to a 52-week high of $11.33 and peaked at $13.58 two days later.
According to SEC filings submitted by the Trumps on February 24, they each own 966,000 shares in the company, which constitutes 6.7% of its outstanding shares, and they hold warrants for an additional 432,000 shares.
Neither Donald Trump Jr., Eric Trump, nor the insiders from Dominari Holdings who participated in the private placement responded to requests for comment.
Is This Insider Trading?
Likely not. “Generally speaking, when a company sells stock directly to someone (private placement) and the buyer is aware of all material facts about the company, there is no violation of insider trading or securities fraud,” explained Allan Horwich, a law professor at Northwestern University with extensive experience in securities litigation, to Forbes. “If there is no public market trading where someone unaware of the information could be negatively affected, then no insider trading violation or securities fraud occurs.”
What To Watch For
“Regardless of securities laws, selling stock too cheaply could breach a fiduciary duty owed to the company by the directors who approved the transaction,” Horwich stated. “In such cases, the company is unlikely to sue its own directors for wrongdoing, so shareholders would need to pursue a derivative claim against directors for breaching a duty that resulted in the company being harmed, such as selling stock below market value.” However, given Dominari Holdings’ small market capitalization, it may be less appealing for plaintiffs’ attorneys to take on as a case.”
Future SEC filings might provide more clarity regarding the Trumps’ holdings and if any insiders capitalized on the stock increase following the announcement. So far, none have reported selling, though they might face restrictions in the short term. “Various regulations might prohibit directors from reselling the privately placed stock for at least six months,” noted James Park, a UCLA law professor specializing in securities regulations. “They may also have agreed to hold onto the shares longer than six months, which would diminish but not eliminate concerns about unjust enrichment, as they wouldn’t be able to quickly flip the shares to profit from the market’s reaction to the announcement.”
Crucial Quote
“The timing of the announcement regarding the Trumps’ involvement with the company immediately following the private placement is atypical. While insiders providing funding is not unusual, the simultaneous disclosure of this news with the private placement is quite rare,” commented Adam Pritchard, a professor at the University of Michigan who specializes in corporate and securities law. “Private placements are typically faster and more cost-effective, attracting a limited pool of investors, including insiders. The optics surrounding the simultaneous announcement with the private placement is certainly outside the norm.”
What We Don’t Know
The SEC filings made by the Trumps do not reveal when they began acquiring shares, how they obtained all of their shares (whether through public market purchases, private placements, or bonuses for joining the advisory board), or the pricing of those shares. According to a company press release, however, the brothers did purchase at least some shares in a private sale.
It seems reasonable to conclude that Donald Trump Jr. and Eric Trump acquired shares in connection with their advisory roles. The advisory board agreement template filed by Dominari Holdings with the SEC on February 12 indicates that members receive an unspecified number of shares upon joining the board, along with additional shares when the company’s market capitalizations reach $50 million, $100 million, and $150 million. Given the company’s market cap exceeded both $50 million and $100 million in February following the news involving the Trumps, it is likely they received extra shares at that point.
SUrprising Fact
There is minimal public documentation regarding Dominari Holdings’ advisory board prior to the announcement of the Trumps’ involvement.
Tangent
Trading activity for Dominari Holdings experienced a significant increase ahead of the February announcement regarding the Trumps’ investment in the company and their addition to its advisory board—a rise described by some securities law experts as “suspicious.”
Big Number
$747,000: Estimated annual rent Dominari Holdings pays the Trump Organization for its headquarters located in Trump Tower, according to independent journalist Wendy Siegelman, referencing SEC filings.
Forbes Valuation
As of November 2024, Forbes assessed Donald Trump Jr.’s net worth at $50 million and estimated Eric Trump’s net worth to be 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)
