Shares of Trump Media & Technology, the social media company founded by former President Donald J. Trump, took a hit on Monday as the company filed to register the potential sale of tens of millions of additional shares. This move caused the company’s stock to plummet by 18.3 percent, wiping out hundreds of millions of dollars from its market value and impacting Trump’s majority stake. Since an initial surge in its stock price following its merger with Digital World Acquisition Corp., the company’s shares have dropped by approximately 60 percent.
The filing by Trump Media included the registration of more than 146 million shares of stock that could potentially be sold, along with an additional 21 million shares converted after the exercise of warrants. The filing also revealed an extra 36 million shares allocated to Trump as part of an “earnout” bonus. While the company clarified that investors listed in the statement were not necessarily planning to sell their shares immediately, the market reacted to the possibility of a flood of new shares affecting the stock price negatively. Furthermore, large hedge funds like Anson Funds and Hudson Bay, alongside other institutional investors, were among those with shares registered for potential sale.
Investors, including fund managers like Marshall Wace and Zazove Associates, had anticipated Trump Media’s stock price fall following the registration filed, positioning themselves to profit from the movement by shorting the stock. This strategy drove significant demand from investors seeking to bet against the company’s stock price. With Trump Media’s revenue solely dependent on advertising from Truth Social, doubts about its ability to generate profit have lingered, contributing to the stock’s decline. Additionally, the registration statement must first undergo review and approval by the Securities and Exchange Commission before any stockholders can sell shares.
