Trump Media & Technology Group Corp. faced a setback in late trading as the US Securities and Exchange Commission approved a regulatory filing that could potentially dilute shareholders. This news sent the social media company, mostly owned by former president Donald Trump, tumbling roughly 15% to around $26 in after-hours trading.
The clearance allows investors in the firm’s derivatives, known as warrants, to swap their holdings for shares in the company. While this move could add up to $247 million to Trump Media’s balance sheet, it also increases the number of shares available for trading, potentially creating selling pressure as investors exercise their warrants.
Trump Media’s Chief Executive Officer, Devin Nunes, expressed optimism about the company’s future prospects, stating that they are well positioned to pursue TV streaming, platform enhancements, and potential mergers and acquisitions. Nunes has also been proactive in addressing concerns about illegal short selling, reaching out to Congress and regulatory bodies to investigate these claims.
The warrants, which fell 32% to $14 each in late trading, are seen as a common feature in special purpose acquisition company deals. While they are designed to reward investors, they can dilute the value of existing shareholders’ stakes through the issuance of additional shares.
Former president Donald Trump remains the largest stakeholder in Trump Media, with nearly 115 million shares worth close to $3 billion. However, he and other insiders are currently restricted from selling their stock until September under a lock-up provision, which could potentially be altered by the company’s board.
Trump Media, the owner of Truth Social, has experienced volatility since its public debut earlier this year, with the stock price reaching highs of $79.38 before dropping to as low as $22.55 in subsequent weeks.
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