This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
Trump Media and Technology Group (NASDAQ: DJT) appears to have caught a lot of investors by surprise after filing for the issuance of new shares in what is usually a routine affair in the de-SPAC process.
To wit, Truth Social's parent entity has now filed with the SEC to pave the way for the following transactions:
- The issuance of 21.491 million shares upon the exercise of warrants
- The permission for Trump Media and Technology Group insiders to sell up to146.108 million common shares after the expiration of their lock-up period, which is the earliest of either the 25th of September, 2024, and the date on which the stock price equals or exceeds $12 per share for 20 trading days within a 30-trading day window that commences on the 22nd of August, 2024.
- The permission to sell 4.061 million warrants held by Trump Media and Technology Group insiders after the expiration of the lock-up period.
Of course, two separate disclaimers within today's filing might have played an important role in spooking investors. First, Trump Media and Technology Group has disclosed that the number of shares being offered for resale exceeds the stock's current share float:
"The Resale Securities represent approximately 256% of our public float and approximately 107% of our outstanding shares of Common Stock as of January 31, 2024 (after giving effect to the issuance of shares of Common Stock upon exercise of the Warrants)."
Second, Trump Media and Technology Group has highlighted the specter of significant losses for current investors:
"The sale of the Resale Securities, or the perception that these sales could occur, could depress the market price of our Common Stock. Despite a decline in price, our Selling Security holders may still experience a positive rate of return on the shares of Common Stock purchased by them due to the lower price per share at which such shares of Common Stock were purchased as referenced above."
Trump Media shares plunge after company files to issue additional $DJT stock - CNBC$DJT is currently down 17% in pre market trading pic.twitter.com/oj8WoioPmO
— Evan (@StockMKTNewz) April 15, 2024
This development has caused Trump Media shares to slump by as much as 17 percent in the immediate aftermath. While the stock has now given up all of its post-merger gains, it is still up on a year-to-date basis.
We recently reported that the Truth Social platform raked in a paltry $4.131 million in revenue in the entire of 2023, incurring a net loss of over $58 million. Do note that Trump Media's merger with the SPAC Digital World has unlocked around $193 million in proceeds, which should be sufficient to alleviate any near-term liquidity concerns.
