Trump Media & Technology Group, the parent company of Trump’s Truth Social platform, experienced another sharp decline in its stock price on Thursday. This downturn came after regulators approved its registration statement, allowing investors to exercise warrants and the company to issue additional shares.
Warrants, which enable investors to exchange their holdings for shares in the company, can lead to dilution of the shares held by existing shareholders. When investors exercise warrants, some may choose to sell the shares, putting downward pressure on the stock price.
The share price of Trump Media dropped by 15% to close at $26.75, nearing its all-time low of $22.55. Former President Donald Trump, the company’s largest shareholder, has seen a significant decrease in his paper wealth since June, with his nearly 115 million shares now worth around $3 billion, down from over $5 billion. Trump and other insiders are restricted from selling their stock until September, unless the board decides otherwise.
The company expressed optimism about the approval of its registration statement, which could potentially add up to $247 million to its balance sheet. Trump Media’s CEO, Devin Nunes, emphasized the company’s plans to pursue TV streaming, platform enhancements, and potential mergers and acquisitions with the additional funds.
Nunes has raised concerns about “naked” short selling practices, which he believes have contributed to the volatility in the company’s stock. Short sellers who engage in “naked” short selling do not actually borrow or own the shares they sell, but bet on the stock price falling.
Since going public earlier this year, Trump Media’s stock has been highly volatile, reaching a high of $79.38 before plummeting to $22.55. With a market cap that has dipped below $5 billion, the company’s value is heavily reliant on the Trump brand and his dedicated supporters.
In the competitive social media landscape, Trump Media lags behind industry giants like Facebook, TikTok, and YouTube. The company reported a net loss of $327.6 million in the first quarter on revenue of less than $1 million.
The recent developments have only added to the uncertainties surrounding Trump Media’s stock since its merger with Digital World Acquisition Corp. earlier this year. Investors and analysts continue to monitor the company’s performance closely amidst ongoing fluctuations in its stock price.
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