Trump Media & Technology Group’s stock is plummeting once more on the announcement of a possibly enormous fresh share inflow. The financially troubled business is losing money quickly, and a fresh stock offering might be able to keep it afloat.
However, returning to the market with additional shares has a drawback: The owner of Truth Social would have more than 15% more stock available to the public with the announcement on Monday regarding the sale of an additional 21.5 million shares. That would significantly reduce the value of the stakes held by current shareholders, including former President Donald Trump. Furthermore, it implies that millions of shares might be liquidated.
The purpose of this filing is to register all shares, including warrant-linked shares, pertaining to the merger that made Trump Media public. The holder of a warrant is entitled to purchase stock in the company at a predetermined price.
According to Morningstar vice president of research John Rekenthaler, “the belief is that they’re going to exchange the warrant for a share of stock and then immediately sell that stock.”
Even though the decision would anger shareholders, Matthew Tuttle, CEO of Tuttle Capital Management, claims that it would be “stupid” for management to refrain from selling more stock.
TMTG (DJT) stock dropped about 18% on Monday afternoon. In anticipation of combining Trump’s media company with a blank-check purchase company, the stock had shot higher in recent months. However, since its peak on March 26, the day the merger was finalized and it began trading publicly as TMTG, it has lost more than 60% of its value.
“A secondary offering is always a risk whenever you see a stock jump, like you saw this jump,” stated Tuttle. “I believe that many investors in this are unaware of that. Many people who are presumably Trump supporters are sitting there thinking, “What the heck?”
However, he stated that the stock’s decline based on this most recent information is probably just temporary.
Some individuals are likely to get upset over this. Tuttle said, “Others might see it and try to buy the dip.” “This is going to be a meme stock as long as Trump is in the news in any capacity. Individuals are going to exchange it.
Since the company went public, shareholders—including Trump—have already suffered a decline in the value of their ownership.
More than half of the money lost by anyone who purchased Trump Media on March 27 at the closing high of $66.22. Trump’s net worth has decreased as a result of the sharp drops. At the close, the value of the former president’s interest in Trump Media was $5.2 billion. It had fallen to roughly $2.3 billion as of Monday morning. Trump’s net worth fell about $400 million Monday from the stock’s plunge.
More than 146 million shares, including all 114.8 million of Trump’s 78.8 million present shares and 36 million prospective shares that could be given if the stock price stays over a particular threshold, are also being registered for sales with this filing.
According to Michael Ohlrogge, an associate professor at NYU School of Law, even though they won’t be allowed to sell their shares right away, this action puts them one step closer to being able to do so once the remaining restrictions are lifted, including a six-month lock-up period.
Why the stock of Trump Media is so unstable
There are several causes for the stock’s striking fluctuations. The business is associated with Trump, a divisive politician whose relationship to the stock has drawn attention. Following years of legal and regulatory obstacles, the former president made his comeback to Wall Street with the public launch of Trump Media.
Retail investors have been advised by experts to exercise caution when trading the stock, particularly because the company’s exorbitant valuation is not supported by the company’s fundamentals. In 2023, Trump Media earned only $4.1 million while suffering $58 million in losses.
At the moment, Trump holds more than 57% of the business’s shares. After the corporation issues more shares, Trump would hold slightly less than half of its publicly listed stock, unless he bought stock in the fresh IPO.
However, the business requires cash. It has declared that it seriously doubts its capacity to carry on with business as usual. In addition to losing millions of dollars and a large number of users, the company makes little money.
The corporation issued a caution to potential investors, stating that the company’s reputation and brand are at danger due to Trump’s continuing legal actions, even though the share sale had nothing to do with the criminal trial that began on Monday.
“President Donald J. Trump is embroiled in multiple legal actions. A poor result in any of the current legal processes could have a detrimental effect on TMTG, the business stated. “TMTG’s business would be adversely affected if President Donald J. Trump were to cease to be able to devote substantial time to Truth Social.”
A background update and new developments have been added to this story. Additionally, it fixes the Monday decline in Trump’s net worth.
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