Donald Trump’s social media startup, Trump Media & Technology Group Corp, encountered a significant decline in its stock value as the company took a first step toward allowing insiders, including the former president, to capitalize on their stakes. This move came as Trump Media filed to register shares, including those linked to warrants, potentially bringing forward sales from insiders that are currently not permitted until September.
As a result, the stock of Trump Media tumbled 18%, reaching a price of $26.61 per share. This drop has cut its year-to-date gain to 52% and took the stock to its lowest level since before Trump’s rival Ron DeSantis quit the primary race in January.
DeSantis’s exit sparked an 88% spike in the stock, extending a rally that began after Trump’s victory in the Iowa caucuses. The firm behind Truth Social, the social media platform associated with Trump Media, had gained attention from individual investors who saw investing in the stock as a way to show support for Trump’s 2024 re-election campaign. Although the stock had soared about 270% leading up to its trading debut this year, it has since plunged more than 65% from its peak.
The decline also affected the warrants tied to the stock, which can be exchanged for cash. The warrants sank 15% to $11.62 per warrant. Since its March debut, the overall market value of the company has been slashed by over $5 billion.
These developments have led to a substantial reduction in the potential value of the company for former President Trump. In just a matter of weeks, the paper windfall for Trump has dropped from over $5 billion to $2.1 billion. However, if the stock manages to remain above the $17.50 mark, Trump and other insiders would be in line to receive an additional 40 million shares, collectively valued at $1.1 billion.
Trump Media registered up to 146 million common shares, along with up to 21 million shares issuable upon the exercise of warrants. Additionally, the filing included up to 4 million warrants for purchasing common stock. All these securities being registered are either held by or underlie securities owned by existing holders of Trump Media.
It’s worth noting that the filing to register shares for resale is a common occurrence for blank-check deals, similar to the one completed by Trump Media to become a public company. However, the filing itself does not indicate that a sale has commenced or will happen in the future.
The registration filing now requires the review and feedback of the US Securities and Exchange Commission to become effective. Once approved, warrants and $11.50 in cash can be swapped for shares, while insiders, including the former president, could gain board approval to begin selling stock. Presently, insiders are restricted from selling any shares until September.
Meanwhile, Trump is embroiled in a lawsuit with two Trump Media co-founders who alleged that he attempted to dilute their stakes. The lawsuit recently secured permission from a Delaware judge to include allegations of Trump retaliating against them by locking up their shares for six months, causing potential financial harm. Trump himself is also subject to the same restrictions on selling shares.
Legal representatives for Trump Media argued that share lockups are typical in blank-check transactions and allowing co-founders to sell stock freely would harm the company and other stockholders.
Simultaneously, Trump’s first criminal trial started in Manhattan, where he faces charges of falsifying business records. The prosecution accuses him of hiding a hush-money payment to a porn star prior to the 2016 election. This trial is just one of four criminal prosecutions Trump is facing as he campaigns for a return to the White House.
