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lite.cnn.com - on gopher - inofficial
ARTICLE VIEW:
/
Trump stock tanks after announcing massive share sale
By Krystal Hur and David Goldman, CNN
Updated:
10:13 PM EDT, Mon April 15, 2024
Source: CNN
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 .
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.
“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 () 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 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.
Why Trump Media stock is so volatile
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 after years of regulatory and legal
hurdles.
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 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 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.
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