======================
I was driving to a meeting of the Baltimore CFA Society, and listening to Bloomberg Radio, which was carrying President-Elect Trump’s Press Conference. I didn’t think too much about what I heard until Sheri Dillon talk about what was being done to eliminate conflicts of interest. Here is an excerpt:
Some have asked questions. Why not divest? Why not just sell everything? Form of blind trust. And I?d like to turn to addressing some of those questions now.
Selling, first and foremost, would not eliminate possibilities of conflicts of interest. In fact, it would exacerbate them. The Trump brand is key to the value of the Trump Organization?s assets. If President-elect Trump sold his brand, he would be entitled to royalties for the use of it, and this would result in the trust retaining an interest in the brand without the ability to assure that it does not exploit the office of the presidency.
[snip]
Some people have suggested that the Trump ? that President-elect Trump could bundle the assets and turn the Trump Organization into a public company. Anyone who has ever gone through this extraordinarily cumbersome and complicated process knows that it is a non-starter. It is not realistic and it would be inappropriate for the Trump Organization.
It went on from there, but I choked on the last paragraph that I quoted above. (Credit: New York Times, not all accounts carried the remarks of Ms. Dillon, a prominent attorney with the firm Morgan Lewis who structured the agreements for Trump) ?As I said before:
Trump to Outline Plans for ?Leaving My Great Business? Dec. 15 https://t.co/iIwweP2LcN Time to IPO and sell off the Trump Organization $$
? David Merkel (@AlephBlog) November 30, 2016
An IPO of the Trump Organization was?realistic. ?I’m not saying it could have been done by the inauguration, but certainly by the end of 2017, and likely a lot earlier. ?I’ve seen insurance companies go through IPO processes that took a matter of months, a few because they had to sell the company to raise liquidity quickly for some reason.
In an IPO, Trump, all of Trump’s children and anyone else with an equity interest would have gotten their proportionate share of the new public company. ?Trump could have provided a lot of shares for the IPO, and instructed the trustee for his assets to sell it off?the remainder over the next year or so.
While difficult, this would not have been impossible or imprudent. ?Trump?might lose some value in the process, but hey, that should be part of the cost for a very wealthy man who becomes President of the US. ?There would be the countervailing advantage that all capital gains are eliminated, and who knows, that might settle his existing negotiations with the IRS.
Ending the counterfactual, though conflict of interest rules don’t apply to the President, Trump had?an opportunity to eliminate all conflicts of interest, and did not take it.
PS — Many major hotels are in the “name licensing” business — I also don’t buy the argument that Trump could not sell off the organization in entire, with no future payments for the rights of using the name. ?A bright businessman could create a new brand easily. ?It’s been done before.
A public company would have public financial statements. Then people might draw conclusions about the amount of money he really has.
It would tell us how much he is really worth as a snapshot. Post-IPO, the remaining shares would be sold, and other investments purchased — slowly his wealth would change.
Trump has the morals of a grave robber and the ethics of a carpet bagger. Hardly a surprise when he behaves accordingly.
David: Great post, and an issue that everyone should be concerned about. Incentives matter. Public choice matters. And an IPO is *not* a non-starter. Royalties can be securitized and sold off. Happens every day. Frank Zappa might have been an innovator in the ’90s, but 20 years later, securitizing royalty payments should be easy-peasy.
Here’s a suggested new brand: “Presidential” Hotels/Casinos/Airlines. Imagine the Trump brand competing in the marketplace with the Presidential brand.
My guess is that Trump will do some things that future presidents won’t be allowed to do. We’ll see. We still don’t know what he will do. His past record in non-political life was all over the map. He told a lot of people what they wanted to hear… which was more clever than his opponents.
Thanks for your comment, Publius. I had meant to write back to you at other times, but was snowed under the load of my one-man operation.
Too much of his identity is tied up with his businesses. He can’t walk away from them.
Nick de Peyster
http://undervaluedstocks.info/