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Trump Media shares plunge after company files to issue more DJT stock

Trump Media shares plunge after company files to issue more DJT stock

 


This photo illustration shows an image of former President Donald Trump reflected on a phone screen displaying the Truth Social app, in Washington, DC, February 21, 2022.

Stefani Reynolds | AFP | Getty Images

Shares of Trump Media plunged more than 15% Monday after the company filed to issue millions more shares.

Trump Media's spectacular fall came as Donald Trump sat in a Manhattan courtroom for the start of his criminal trial on hush money charges. Trump is the company's majority shareholder.

Trump Media, which created the Truth Social app and trades under the ticker symbol DJT on Nasdaq, fell nearly 20% last week.

Since the company began trading on March 26, its stock price has fallen more than 62 percent, from an opening price of $70.90 that day to around $27 on Monday. .

As a result, its market capitalization was reduced by almost $6 billion, leaving it at around $3.7 billion as of Monday.

The company's intention to issue more common stock was disclosed in a preliminary prospectus filed with the Securities and Exchange Commission.

Shares cannot be issued until a registration statement with the SEC becomes effective.

The filing describes a plan to offer more than 21.4 million shares of common stock, issuable “upon the exercise of warrants,” the filing states. Stock warrants give the holder the opportunity to purchase shares at a predetermined price within a certain period of time.

Trump Media predicted in the filing that it would receive “up to a total of approximately $247.1 million from the exercise of the warrants.”

The closing price of Trump Media's warrants was $13.69 on Friday, according to the filing. The warrants are traded on Nasdaq under the symbol “DJTWW”. This ticker was down more than 8% as of 11 a.m. ET.

The company is also seeking to offer the resale of up to 146.1 million shares from “selling security holders,” 114.8 million of which are held by Trump himself. Trump owns 78.8 million shares of the company and could get 36 million “earnout shares” if the stock stays above $17.50 for enough trading days.

Trump's current stake in the company, nearly 60% of its shares, was worth more than $2.2 billion as of Monday morning's stock price. Trump is not allowed to sell his shares until a six-month lock-up period expires.

The lock-up period is a condition of Trump Media's long-delayed merger with shell company Digital World Acquisition Corp., which was finalized on March 25.

Trump, whose social media following was significantly reduced after his move to Truth Social following his suspension from Twitter and Facebook in 2021, tried to encourage his followers to flock to the new app. It's unclear whether they responded to Trump's call: the company hasn't publicly released key performance indicators, including the number of active Truth Social users.

It did, however, reveal a net loss of $58.2 million on revenue of just $4.1 million in 2023.

“Stock market valuation is detached from financial reality,” said Ben Silverman, head of Verity Research.

But if the stock price remains high enough for the company to issue additional shares, Trump and other insiders could be on track to receive a windfall worth more than $1 billion at current stock prices.

Sources

1/ https://Google.com/

2/ https://www.cnbc.com/2024/04/15/trump-media-shares-plunge-after-company-files-to-issue-additional-djt-stock.html

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