Donald Trump is nearing the day he can cash out of Truth Social’s parent company, raising concerns of a potential sell-off that could hit the meme stock hard.
On paper, Trump’s stake in Trump Media and Technology Group (TMTG) is valued at $1.95 billion, which could help cover his mounting legal fines.
However, when he agreed to a reverse merger with Digital World Acquisition Company (DWAC) on March 25, he accepted a six-month lockup period, preventing him from selling his 115 million shares.
Trump owns 59% of TMTG, and any sale could tank the stock unless done in small batches.
With the lockup expiring in three weeks, investors are growing anxious.
Trump’s financial situation appears strained—he’s been selling Trump-themed sneakers, “God Bless the USA” Bibles, and now offering a piece of the suit he wore during his first debate with Joe Biden to collectors who purchase $1,500 worth of digital Trump trading cards.
On Wednesday, TMTG shares fell 6%, closing just below $17. This wipes out all gains for the year, while the S&P 500 has risen 16% over the same period.
TMTG officials did not respond when approached for a statement, while Trump left a Fortune request for comment both on Truth Social and X unanswered.
Loss-making TMTG still valued at 1,000 times its revenue
TMTG has now lost 80% of its value since hitting its all-time high of $79.38 on March 26, the stock’s first day of trading under the DJT ticker. That valued Trump’s personal stake at nearly $9.11 billion at the time.
The stock may continue to decline. Last week, CEO Devin Nunes and CFO Philip Juhan sold $2.5 million worth of shares, further dampening investor sentiment.
Despite its $3.4 billion market cap, the loss-making social media company is trading at over 1,000 times its annual revenue. Sales for the first half of the year were just $1.6 million, with deeply negative cash flow.
Wall Street analysts avoid TMTG due to its “meme stock” status, attracting little interest from professional investors. Even if analysts wanted to cover it, TMTG doesn’t publish key metrics, including its number of active, monetizable users.
The stock has mostly been viewed as a bet on Trump’s reelection. However, with polls tightening in key battleground states and Kamala Harris gaining momentum, that bet is now less certain.
November election outcome key to TMTG’s stock price
Trump has now been forced to return to Twitter (now X), where he has 10 times as many followers and a far larger audience, in order to reach potential voters.
This further dilutes the value Truth Social has for users if they can access his content on other competitors’ platforms.
Should he lose in November, however, Truth Social’s importance going forward would be greatly diminished since Trump’s political career would likely be over.
John Rekenthaler, vice president of research at financial services firm Morningstar, told Quartz that buying shares in TMTG is synonymous with purchasing Trump’s personal brand.
“But he’s not going to have a brand,” he said last week, “if he loses a second straight presidential election.”
There is even a scenario by which Trump could sell his TMTG shares around September 20, some five days earlier, as long as they do not dip below $12.
Either way, there are bound to be legal complications involved in a sale since his son, Don Jr., is privy to material non-public information as a director, including its third-quarter performance.
The only way this stock overhang issue ends well for TMTG investors is if Trump manages to find a strategic investor in the company willing to acquire his stake in full.
This story was originally featured on Fortune.com
Source: finance.yahoo.com