The week-long liquidation of the shares of Trump Media & Technology Group Corp. (DJT), founded by former President Donald Trump, accelerated on Friday against the backdrop of the SEC’s green light for registration of Trump Media’s additional shares. This paved the way for early investors to offload some shares and even exercise their stock warrants.
The stock of Trump Media ended Friday’s trading session at $27.66, up $0.91, or 3.40%, from the prior close. Notably, Friday’s closing price is over 40% below the $49 level seen at the beginning of June.
Friday’s decline in the stock’s price was supplemented by a significant surge in trading volume, with over 13.2 million shares changing hands—more than 300% of its monthly average trading volumes. The huge volume and price fluctuation are notable given the company’s minuscule revenue generation. The decline in share price on Friday followed a roughly 10% plunge last Tuesday, which also saw over 200% of the average trading volume.
After Tuesday’s market close, Trump Media revealed that the US regulator Securities and Exchange Commission (SEC) had announced its registration info effective. This news caused the stock to plummet over 17% in post-market trading. Markets remained closed on the next day, but analysts suggest that the SEC’s clearance of Trump Media’s extra shares likely triggered last week’s trading delirium.
The sell-off intensified the decline in Trump Media’s stock, which started in the final week of May after a New York judge found the ex-president guilty of 34 counts (felony) of fudging business documents. The prospectus approved by the market regulator (SEC) allows early investors to liquidate some shares and convert stock warrants (into shares), paving the way for a further drop in stock price.
Despite the downturn, Trump Media portrayed the development as positive, forecasting potential gains of about $247 million in case all warrants were sold for cash. The recent slump in the stock has significantly impacted Trump’s net worth, at least hypothetically.
The probable Republican nominee owns 114,750,000 shares of Trump Media, representing roughly a 65% stake. These shares commanded a value of over $5.6 billion at the start of June but were valued at about $3 billion after Friday’s close. Trump is unable to liquidate his holdings as the six-month freeze period ends only at the end of September.
Lockup clauses hinder major stakeholders and insiders from liquidating their holdings immediately after an enterprise gets listed. Trump Media became a publicly listed company in late March, after a long-drawn merger with a SPV (special purpose vehicle). The unpredictable price fluctuations of DJT in its initial months on the Nasdaq were mostly not associated with any particular news or business events, leading stock pundits to brand it a meme stock.
The company’s only offering, Truth Social, which went commercially live at the start of 2022, has attracted relatively few users compared to established social media behemoths like X (formerly known as Twitter) and Facebook. Last month, for the first quarter, Trump Media reported a net loss of about $328 million on revenues of roughly $771,000.
The stock of Trump Media is expected to remain bearish for the foreseeable future.
Technically, the stock is declining after failing to break the resistance at the $50 level. The next major support is anticipated to be only near the $20 level. Additionally, the stock is trading below its 50-day moving average, while the MACD indicator is showing a negative reading. Therefore, we anticipate Trump Media’s stock to remain in a downtrend for the next few trading sessions.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
