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CNN
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Trump Media & Technology Group’s stock is tumbling again after the company announced a potentially massive new influx of shares. The struggling company is rapidly losing money, and a new stock offering could help it stay afloat.
But there’s a downside to going back to the market with more shares: The addition of 21.5 million shares for sale announced Monday would add more than 15% more stock to the publicly available shares of the Truth Social owner. That would substantially devalue existing shareholders’ stakes — including that of former President Donald Trump. And it means that millions of shares could be sold off.
This filing seeks to register all shares related to the merger that took Trump Media public, including those that are tied to warrants. Warrants give the holder the right to buy shares of a company’s stock at a set price.
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“The belief is that they’re going to exchange the warrant for a share of stock and then immediately sell that stock,” said John Rekenthaler, vice president of research at Morningstar.
Matthew Tuttle, chief executive of Tuttle Capital Management, says that management would be “stupid” not to sell more stock, even though the move will upset shareholders.
Shares of TMTG (DJT) closed more than 18% lower on Monday. The stock had rocketed higher in recent months in anticipation of merging a blank-check acquisition company with Trump’s media business. But it has lost more than 60% of its value from its peak on March 26, the day after the merger was completed and it started trading publicly as TMTG.
Still, the stock’s move lower based on this latest update will likely be temporary, says Tuttle.
“This is going to piss some people off. Other people might look at it and try to buy the dip,” he said. “As long as Trump is in the news in some way, shape or form, this is going to be a meme stock. People are going to trade it.”
Shareholders, including Trump, have already seen their holdings dwindle in value since the company went public.
Anyone who bought Trump Media at the closing high of $66.22 on March 27 has now lost more than half of their money. The steep declines have put a dent in Trump’s net worth. The former president’s stake was valued at $5.2 billion at the closing high for Trump Media’s stock price. As of Monday’s close, it plummeted to about $2.1 billion. Trump’s net worth fell roughly $470 million Monday from the stock’s plunge.
This filing also seeks to register more than 146 million shares held by some stockholders for resale — including all 114.8 million of Trump’s 78.8 million current and 36 million potential shares that could be granted if the stock price holds above a certain level.
Although they won’t be able to sell those shares right away, this move means they’re one step closer to being able to once the rest of the prohibitions are cleared including a six-month lock up period, says Michael Ohlrogge, associate professor at NYU School of Law.
There are a number of reasons behind the stock’s eye-popping swings. The company is tied to Trump, a polarizing political figure whose association with the stock has attracted scrutiny. Trump Media’s public debut also marked the former president’s return to Wall Street after years of regulatory and legal hurdles.
Experts have warned retail investors to be careful if they choose to trade the stock, especially because the company doesn’t have the fundamentals to back up its sky-high valuation. Trump Media lost $58 million in 2023 and made just $4.1 million in revenue.
Trump currently owns more than 57% of the company’s shares. Unless he were to purchase stock in the new public offering, Trump would own just under half of the company’s publicly traded stock after it issues more shares.
But the company needs money. It has said it has substantial doubt about its ability to continue operating. The company generates little revenue, it’s losing millions of dollars and it is losing many of its users as well.
Although the share offering was not directly related to Trump’s criminal trial beginning Monday, the company noted in a warning to potential investors that Trump’s ongoing legal proceedings pose a risk to the company’s reputation and brand.
“President Donald J. Trump is the subject of numerous legal proceedings. An adverse outcome in one or more of the ongoing legal proceedings could negatively impact TMTG,” the company noted. “If President Donald J. Trump were to cease to be able to devote substantial time to Truth Social, TMTG’s business would be adversely affected.”
This story has been updated with additional developments and context. It also corrects the amount Trump’s net worth fell Monday.
Jessica Roberts is a seasoned business writer who deciphers the intricacies of the corporate world. With a focus on finance and entrepreneurship, she provides readers with valuable insights into market trends, startup innovations, and economic developments.
