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Trump Media & Technology Group Announces Additional Share Issuance
On Monday, Trump Media & Technology Group made the announcement that it would be issuing millions more shares, which subsequently led to a significant decline in its stock value. The company, notable for its association with former President Donald Trump’s Truth Social platform, revealed in a Securities and Exchange Commission filing the registration of the resale of nearly 21.5 million new shares of common stock issuable through warrants, in addition to approximately 146 million shares of common stock and around 4 million warrants for the purchase of common stock.
It is important to note that certain shares held by company insiders may still be subject to restrictions on trading until the expiration of a lock-up agreement, typically lasting for 5-6 months post the initial public offering (IPO) date. Following this development, Trump Media’s stock experienced a notable decline of 18.3% to $26.61 per share, marking a total drop of almost 67% from its historical peak of close to $80 during the initial week of trading on the public market.
Evaluating Trump Media’s Share Issuance
The number of shares offered for resale by Trump Media accounts for a significant percentage, equivalent to approximately 256% of the company’s public float, which refers to the regular shares available for public trading, and approximately 107% of its outstanding shares as of January 31st. Despite the decline in the company’s stock value following the news, Trump Media reassured shareholders that they could still potentially realize a positive rate of return, emphasizing the possibility of profitability for common stock purchases made at the closing price of $32.59 on April 12th.
Notably, Trump Media initiated its public listing on the Nasdaq under the ticker DJT on March 26th, subsequent to its merger with Digital World Acquisition Corp., a special purpose acquisition company (SPAC). The company’s stock witnessed a remarkable surge during its first trading week, with shares reaching a peak value of nearly $80 each. Market analysts attributed this initial stock valuation success more to sentiment and support for Donald Trump rather than the company’s true market fundamentals, often comparing Trump Media’s stock behavior to that of other meme stocks like GameStop, AMC, and Reddit.
The downward trajectory in Trump Media’s stock price commenced following the disclosure of substantial losses from operations, totaling almost $16 million in 2023, alongside significant interest expenses amounting to $39.4 million and a revenue generation of only $4.1 million. This financial performance paled in comparison to the preceding year, which reported losses of $23.2 million in 2022, with interest expenses of $2 million against a revenue of $1.5 million. In light of this financial turmoil, Trump Media admitted in SEC filings its inadequate financial resources to sustain ongoing operations, thus casting doubt over its operational continuity.
The recent slump in Trump Media’s stock value, dipping below $30 per share and reaching a nadir since its NASDAQ debut, exacerbated concerns about the company’s market capitalization. The ensuing market value decline to approximately $4.2 billion starkly contrasted with the initial market capitalization exceeding $8 billion during its inaugural trading week, painting a challenging financial outlook for Trump Media & Technology Group.
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