The merger announced Dec. 18 of the Trump Media and Technology Group and fusion company TAE was widely reported, but the reactions have been widely varying. Some have described it as a major financial breakthrough for fusion, others as a pump-and-dump scheme to fleece small investors. Naturally, people have asked what we think.
There are a couple of questions here. First, what is likely to be the reasons behind this deal? Second, how credible is the merged company’s claim that it will start building a working fusion generator this year? Let’s take them one at a time.
It is not at all likely that Donald Trump, the main shareholder in TMTG, and his eldest son Donal J. Trump Jr., TMTG board member, initiated this deal to help achieve fusion energy. Mr. Trump happens to be President, so if he really wanted to help fusion he could have had the US Department of Energy allocate $10 billion dollars to fund every possible route to fusion, including all the dozens of fusion companies operating today. That’s what the Fusion Industry Association, the organization of the fusion companies (including ours) has recommended. There is widespread bipartisan support for fusion in the US congress, so he would have had no trouble getting it into his budget. But instead, his proposed budget reduced fusion funding by 6%.
In addition, as President Trump has pledged to do everything possible to support the fossil fuel industry and has appeared to have kept this pledge so far. Actually getting a working fusion generator to produce cheap, clean unlimited energy would cause oil prices to plummet. That would not exactly help fossil fuel companies, most of which would then face bankruptcy. So why would Trump do that?
On the other hand, if the motivation for this deal on the Trump side is to help TMTG, it at least makes sense. TMTG lost $400 million last year. By the beginning of this year, TMTG shares had dropped by 63% from a high of $97 to $36. By Dec.17, the share price had fallen another 71% to just $10.40. A big bet on Bitcoin was going sour and the social media component was steadily losing money. But in the day since the merge was announced, the stock rose by 50%, although that makes it still down almost 60% for the year. The psychological boost was simply based on “He’s trying something new.”
The TMTG stock (with stock symbol DJT) got a good bounce from the merger with TAE, but only reversed a couple of months losses.
So, if that is the motivation (and we can’t see another one) why did TMTG invest in fusion rather than, say, AI? For one, fusion is getting some media attention. But equally important, almost all private fusion companies (ours certainly included) badly need more capital than they are getting. So in this up-and-coming industry, assets can be acquired cheaply. While the deal is valued in the press as $6 billion, the actual cash involved is $300 million to buy half a company that was valued at about $2-3 billion—quite a bargain.
For TAE, the deal was one for short term gain—an immediate $300 million that they were no doubt having trouble raising. Whether this will help them get to commercial fusion energy is another story, which we get to in our next news item.