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CNN
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Shares of Trump Media & Technology Group fell again after the company announced a potential massive new stock influx. A struggling company is losing money quickly, and a new stock offering could help it stay afloat.
But there's a downside to returning to the market with more shares: The addition of the 21.5 million shares for sale announced Monday will add more than 15% more shares to the company's publicly available stock. The truth is the social owner. This would significantly reduce the value of existing shareholders' stakes – including former President Donald Trump's stake. This means that millions of shares could be sold.
This filing seeks to register all shares related to the merger that took Trump Media public, including those associated with the search warrants. Warrants give their holder the right to buy company shares at a specified price.
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“The belief is that they will exchange the warrant for a share of stock and then sell that stock immediately,” said John Rekenthaler, vice president of research at Morningstar.
Matthew Tuttle, CEO of Tuttle Capital Management, says management would be “stupid” not to sell more shares, even though the move would upset shareholders.
TMTG Shares (DJT) closed down more than 18% on Monday. The stock has risen significantly in recent months in anticipation of a blank-check buyout company merging with Trump's media business. But it has lost more than 60% of its value since its peak on March 26, the day after the merger was completed and it began trading publicly as TMTG.
However, Tuttle says the stock price decline based on this latest update will likely be temporary.
“This is going to piss some people off. Other people might look at it and try to buy the dip.” “As long as Trump is in the news one way or another, in one form or another, this will be a meme stock. People will trade it.”
Shareholders, including Trump, have already done so They saw their possessions dwindling 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 their money. The sharp declines have affected Trump's net worth. The former president's stake was valued at $5.2 billion at the highest closing level of Trump Media's share price. By Monday's close, it had fallen to about $2.1 billion. Trump's net worth has nearly declined $470 million on Monday from the stock's decline.
This filing also seeks to register more than 146 million shares held by certain shareholders for resale — including all 114.8 million of Trump's existing 78.8 million shares and a potential 36 million shares that could be granted if the stock price continues above a certain level.
Although they will not be able to sell those shares immediately, the move means they are one step closer to being able to do so once the rest of the prohibitions including a six-month lock-up period are removed, says Michael Olrogg, associate professor. At New York University School of Law.
There are a number of reasons behind the stock's sudden fluctuations. The company is linked to Trump, a polarizing political figure whose association with the stock has drawn scrutiny. Trump Media's public appearance was also a milestone The former president returns to Wall Street After years of regulatory and legal obstacles.
Experts warned retail investors Caution should be exercised if they choose to trade the stock, especially since the company does not have the fundamentals to support its high valuation. Trump media Lost $58 million in 2023 and generated revenue of only $4.1 million.
Trump currently owns more than 57% of the company's shares. Unless he buys shares in the new public offering, Trump will own just under half of the company's publicly traded shares after it issues more shares.
But the company needs money. She said she had serious doubts about her ability to continue working. The company makes little revenue, loses millions of dollars and loses many of its users as well.
Although the stock offering was not directly related to Trump's criminal trial Starting Monday, the company indicated in a warning to potential investors that Trump's ongoing legal actions pose a risk to the company's reputation and brand.
“President Donald J. Trump is subject to numerous legal proceedings. The company noted that any negative outcome in one or more of the ongoing legal proceedings could negatively impact TMTG. “If President Donald J. Trump stops devoting significant time to Truth Social, TMTG’s business will be negatively impacted.”
This story has been updated with additional developments and context. It also corrects the amount by which Trump's net worth fell on Monday.