Former President Donald Trump's media company, Trump Media & Technology Group (DJT), is facing a challenging time on Wall Street after a brief period of optimism. The company's stock plummeted by 18% during Monday afternoon trading, following a 21% decline the previous week.
This significant decrease in value coincides with Trump Media's recent filing with the U.S. Securities and Exchange Commission, which paves the way for a potential future sale of millions of shares. The filing, known as an S-1 document, pertains to warrants held by investors that have the option to be converted into stock shares, along with shares owned by company insiders.
Notably, the S-1 filing also includes details of the shares held by the former president. However, Trump is currently subject to a "lockup" agreement that prohibits him from selling his shares for approximately another five months. This restriction also applies to his son, Donald Trump Jr., who serves as a board director, and CEO Devin Nunes.
Trump's Stock Plunge Wipes Out Billions from His Stake
The recent stock plunge has significantly impacted former President Trump's stake in Trump Media. Initially valued at $6.25 billion with a 57% ownership position, the stake has now dropped to $2.1 billion, resulting in a paper loss of $4.15 billion.
Since reaching a high of $79.38 on March 26, shareholders have collectively lost $7.2 billion in value. The stock plummeted by 18.4% to $26.58 in Monday afternoon trading.
Impact of Additional Shares on Stock Price
When companies introduce more shares into the market, they risk driving down the stock price. This is primarily due to the laws of supply and demand, where an increase in stock availability can lead to a decrease in share price without a corresponding rise in demand.
Trump Media's investor base includes a significant number of the former president's supporters, as acknowledged by Trump Media CEO Nunes on Fox Business. Some investors on Truth Social remain optimistic about the stock's recovery, while others are capitalizing on the dip to purchase more shares.
One member of a Truth Social group dedicated to DJT shares expressed confidence in the stock's future, stating, "I believe time is our friend. Half a year until the election. I can definitely hold until then at the minimum."
Despite the recent filing, it is unclear whether Trump intends to divest any portion of his 57% ownership stake in Trump Media.
"There have been no indications from Trump about selling his shares," stated Chad Nedohin, a pastor and musician, on Truth Social on Monday. Nedohin clarified that there has been no unexpected issuance of new shares, and the increase in total shares in the S-1 is due to the warrants.
According to Kristi Marvin, the founder of SPACInsider.com, S-1 filings are typically submitted promptly after a SPAC deal closes, usually within 15 or 30 days.
Requests for comments from Trump Media & Technology Group have not been immediately answered.
Growth in Retail Investors
Trump, who uses Truth Social as his main social media platform, has approximately 7 million followers on the app. He often uses the platform to criticize his opponents and highlight favorable polls. Additionally, he has used Truth Social to discuss his ongoing criminal trial, which started on Monday, concerning allegations of tampering with business records related to a "hush money" payment.
Reportedly, around 600,000 retail investors have purchased shares in Trump Media & Technology Group, with approximately 200,000 of them entering the market in recent weeks, as mentioned by Nunes on Fox Business earlier this month. Nunes praised these small investors as "the most remarkable aspect of our company."
Since its debut as DJT on March 26, these investors have experienced a turbulent journey. The stock price surged during the initial two trading days but has since dropped by more than two-thirds of its value.
Such fluctuations in value have led to comparisons with popular "meme" stocks like GameStop, which often attract individual investors based on social media hype rather than traditional financial indicators like revenue and profit growth.
During the previous year, Trump Media experienced a loss of $58 million with a revenue of $4.1 million — an amount roughly half of the annual sales generated by a single Chick-fil-A location.
