Trump Media, the brainchild of former President Donald Trump, took a massive hit with its stock plummeting over 15% in a single day following the news of issuing millions of additional shares. This dramatic decline came at a time when Trump himself was embroiled in a legal battle in a Manhattan courtroom. As the majority stakeholder of the company, Trump’s fortunes seemed to be directly tied to the performance of Trump Media. The stock, which had already fallen almost 20% the previous week, has seen a staggering 62% drop since its public trading debut on March 26, 2023. Starting at an opening price of $70.90, it now stands at around $27 on Monday, a significant devaluation that has slashed the company’s market capitalization by nearly $6 billion, leaving it at a mere $3.7 billion.
The company’s intention to issue more common stock was disclosed in a preliminary prospectus filed with the Securities and Exchange Commission, outlining a plan to offer over 21.4 million shares of common stock upon the exercise of warrants. Stock warrants, giving the holder the right to purchase shares at a predetermined price within a specific timeframe, could potentially bring in approximately $247.1 million for Trump Media. The filing revealed that the closing price of the company’s warrants was $13.69 as of Friday, with the warrants traded under the ticker “DJTWW.” However, the market response to this announcement was less than favorable, with the ticker showing an over 8% decline as of mid-morning.
Trump Media also sought to offer the resale of up to 146.1 million shares of stock held by “selling securityholders,” with a significant portion (114.8 million) owned by Trump himself. Trump’s ownership of 78.8 million shares, amounting to nearly 60% of the company’s total shares, was worth over $2.2 billion at the time of the stock’s decline. Additionally, Trump stands to gain 36 million “earnout shares” if the stock price remains above $17.50 for a specified number of trading days. This potential windfall, along with the resale of shares, could potentially lead to gains of over $1 billion for Trump and other insiders, provided the stock price holds up.
Social Media Strategy and Financial Realities
Following his ban from mainstream social media platforms like Twitter and Facebook, Trump’s move to establish Truth Social under the Trump Media umbrella was seen as an attempt to reclaim his online presence and engage with his followers. However, the success of this strategy remains uncertain, as the company has not disclosed crucial performance metrics, such as the number of active users on the app. With a reported net loss of $58.2 million on revenue of only $4.1 million in 2023, questions have been raised about the sustainability of Trump Media’s business model. Ben Silverman, head of Verity Research, pointed out that the stock valuation seems out of touch with the company’s financial realities, suggesting a disconnect between market perception and actual performance.
The downward spiral of Trump Media’s stock price and the company’s financial struggles indicate a challenging road ahead for Trump and his media venture. As the company navigates through its stock issuance plans and attempts to attract users to Truth Social, the ultimate success of these endeavors remains uncertain. With mounting losses and a shrinking market value, Trump Media faces an uphill battle in proving its viability and long-term sustainability in the competitive landscape of media and technology.
Leave a Reply