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CNN
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Trump Media & Technology Group's stock price is falling again after the company announced a possible large influx of new stock. The company is in financial trouble and is rapidly losing money, so issuing new shares could help keep it afloat.
But there are downsides to returning to the market with more stocks. The additional 21.5 million shares announced on Monday will increase the number of publicly traded shares for Truth Social owners by more than 15%. That would significantly reduce the value of existing shareholders' shares, including former President Donald Trump's. And that means millions of shares could be sold.
The filing seeks to register all shares associated with the merger that took Trump Media public, including shares associated with warrants. Stock options give the holder the right to buy shares in a company at a set price.
“The idea is that they intend to exchange the warrants for stock and then sell the stock soon after,” said John Rekenthaler, vice president of research at Morningstar.
Matthew Tuttle, CEO of Tuttle Capital Management, said management would be “foolish” not to sell more shares, even if the move angered shareholders.
TMTG (DJT) stock fell more than 18% on Monday afternoon. The stock had soared in recent months on expectations of a merger between the blank check acquisition company and President Trump's media business. However, it has lost more than 60% of its value since its peak on March 26, the day after the merger was completed and TMTG began trading publicly.
Still, Tuttle said any decline in stock prices based on this latest information is likely to be temporary.
“This is going to anger some people. Others may see it and try to buy on the spur of the moment,” he said. “As long as President Trump is somehow in the news, this is going to be a meme stock. People will trade it.”
Shareholders, including Trump, have already seen the value of their holdings decline since the company went public.
Anyone who bought Trump Media at its high closing price of $66.22 on March 27th has now lost more than half of their money. The rapid decline has eroded Trump's net worth. The former president's stock was valued at $5.2 billion at Trump Media's highest closing price. As of Monday morning, it had plummeted to about $2.3 billion. Trump's net worth fell by about $400 million on Monday as stock prices plummeted.
The filing also seeks to register for resale more than 146 million shares held by certain shareholders, including President Trump's current 78.8 million shares and stocks whose stock price exceeds a certain level. This includes all 114.8 million of the 36 million shares that could be granted if retained.
Although these shares cannot be sold immediately, the move means they are one step closer to being able to do so once the remaining prohibitions, including a six-month lock-up period, are cleared, said Associate Professor Michael Ohlrogge. says. at New York University School of Law.
There are many reasons behind the surprising fluctuations in stock prices. The company has ties to Trump, a polarizing political figure whose ties to the stock have garnered attention. Trump Media's public debut also marked the former president's return to Wall Street after years of regulatory and legal hurdles.
Experts are warning retail investors to be cautious when trading this stock, especially as the company doesn't have the fundamentals to support its soaring price. Trump Media lost $58 million in 2023, with revenue of just $4.1 million.
Trump currently owns more than 57% of the company's stock. Unless Trump buys shares in an initial public offering, Mr. Trump will own just under half of the company's publicly traded shares after issuing additional shares.
But the company needs money. The company said its ability to continue operating is in serious doubt. The company is barely making any money, losing millions of dollars, and is losing a lot of users as well.
The stock offering is not directly related to Trump's criminal trial, which begins Monday, but the company warned potential investors that Trump's ongoing legal proceedings could harm its reputation. He pointed out that this poses a risk to the 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 adversely affect TMTG.” says the company. “If President Donald J. Trump is unable to devote more time to Truth Social, TMTG's business will be adversely affected.”
This story has been updated with additional developments and background. The amount by which Mr. Trump's net worth decreased on Monday will also be revised.
