After getting a bump last week, shares of Trump Media and Technology Group (Nasdaq: DJT) are falling once again, nearing the lowest point since the parent company of Trump’s Truth Social platform went public via a special purpose acquisition company (SPAC) merger in March.
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Shares of DJT stock closed down more than 6% on Tuesday and are down 27% in the past month. That’s despite majority owner and Republican presidential candidate Donald Trump saying last week that he has “absolutely no intention of selling” his shares, which comprise roughly 60% of the company’s total, when his lockup agreement expires later this week.
That proclamation gave the stock a short-term 25% boost, but it has been on a downward trajectory ever since. What’s driving the losses? It’s not the easiest question to answer.
Equity analysts don’t cover the stock. That’s not especially unusual for companies that go public via SPAC, as Trump Media did. And while the stock has a high-trade volume, it’s largely individual investors, rather than Wall Street firms buying and selling—meaning banks aren’t likely to make any money in covering the stock.
So while the experts aren’t willing to talk about the roller coaster that is DJT, the company’s stock symbol, there are still some solid reasons why some investors might be abandoning ship.
Will Donald Trump sell his Trump Media shares?
He says no, but he didn’t offer a lot of specifics. While Trump says he has no plans to sell his holdings, he could potentially sell a small number of shares and still maintain a strong majority in the company.
We’ll know for sure on Thursday, when he is free to divest as much Trump Media stock as he would like, as long as the price doesn’t fall to $12 before then. Since Trump has a history of changing his mind without a lot of warning, some investors might be hedging their bets and selling some shares just in case.
Will other insiders sell their Trump Media shares?
That seems a lot more likely. Two investors—ARC Global Investments II and United Atlantic Ventures—have already declared plans to sell 18 million shares beginning September 19. Trump Media mounted a legal challenge to prevent that, but a judge denied the motion in late August.
Meanwhile, Andy Litinsky and Wes Moss, former contestants on The Apprentice who cofounded Truth Social, and Patrick Orlando, whose ARC Global sponsored the SPAC that merged with Trump Media, all own shares and have no roles at the company. They’ve all also tussled with Trump Media in legal filings.
Moss and Litinsky both have specifically accused the company of trying to prevent them from selling their shares, which represented an 8% stake at one point. And earlier this month, a judge ordered Trump Media to deliver a larger stake in the company to Orlando, saying TMTG had breached its contract with ARC.
Neither Moss, Litinsky, nor Orlando has specifically announced plans to sell when the lockup expires, but traders are keeping a close eye out for regulatory filings from all three.
What is the case for and against Trump selling his Trump Media shares?
Trump stands to make a lot of money if he sells his shares. Even with the recent plunge in value, his stake is worth more than $2 billion. In a presidential race that’s increasingly neck and neck, that’s a cash pool that might become appealing as November 5 draws near.
However, selling off a big chunk of DJT stock would likely startle investors and cause shares of Trump Media to plummet. And whether Trump wins or loses in November, Truth Social is likely to continue to get a lot of media attention.
If he wins, he will almost certainly continue using it as a platform to make announcements (as he did with Twitter in his first term), which could drive more users to Truth. If he loses the race, Truth will be his megaphone for opposition to the Harris administration—and, perhaps, the election results once again. That, too, would point more people to the platform. And the higher the number of subscribers, the better its chances of attracting advertisers and seeing its stock price increase.
What impact have the assassination attempts had on Trump Media stock?
Not a whole lot, ultimately. Shares spiked in support of Trump after he was reportedly wounded in Butler, Pennsylvania, in July, but have steadily fallen since. And after the incident this weekend, there was a brief rise at the start of trading, but the stock finished lower for the day.
Are the company’s financials affecting DJT’s stock price?
They don’t appear to be what’s driving the stock price. In June, the company reported revenue of just $836,900, a nearly 30% drop from the previous year and a net loss of more than $16 million (28% more than in the same period in 2023). Investors didn’t blink. (The company also ended the most recent quarter with $344 million in cash and cash equivalents, saying it had no debt.) Some have dubbed the company a “belief stock,” meaning it’s driven more by the personalities behind it than the fundamentals.
This post originally appeared at fastcompany.com
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Source: finance.yahoo.com