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Donald Trump may no longer own a majority stake in TMTG after its initial public offering.
new york
CNN
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Trump Media & Technology Group stock is falling again after the company announced a large influx of new stock. The company is in financial trouble and is rapidly losing money, so issuing new shares could help keep it afloat.
However, there are downsides to returning to the market with new stocks. The initial public offering of 21.5 million shares announced Monday will increase the number of publicly traded shares for Truth Social owners by more than 15%. That would significantly reduce the value of existing shareholders' shares, including former President Donald Trump's.
TMTG (DJT) stock fell more than 15% on Monday. The stock had soared in recent months on expectations of a merger between the blank check acquisition company and President Trump's media business. However, it has lost more than 60% of its value since its peak on March 26, the day after the merger was completed and TMTG began trading publicly.
Matthew Tuttle, CEO of Tuttle Capital Management, said management would be “foolish” not to issue new shares, even if shareholders were upset.
“Any time there's a spike in stock prices, as we saw with this spike, there's always a risk in the offering,” Tuttle said. “I think a lot of investors on this don't know that. … There's probably a lot of Trump fans sitting there saying, what the heck?”
Still, he said any decline in stock prices based on this latest information is likely to be temporary.
“This is going to piss some people off. Others may see that and try to buy the push,” Tuttle said. “As long as President Trump is somehow in the news, this is going to be a meme stock. People will trade it.”
Shareholders, including Trump, have already seen the value of their holdings decline since the company went public.
Anyone who bought Trump Media at its high closing price of $66.22 on March 27th has now lost more than half of their money. The rapid decline has eroded Trump's net worth. The former president's stock was valued at $5.2 billion at Trump Media's highest closing price. As of Monday morning, it had plummeted to about $2.3 billion. Trump's net worth fell by about $400,000 after Monday's stock market plunge.
There are many reasons behind the surprising fluctuations in stock prices. The company has ties to Trump, a polarizing political figure whose ties to the stock have garnered attention. Trump Media's public debut also marked the former president's return to Wall Street after years of regulatory and legal hurdles.
Experts are warning retail investors to be cautious when trading this stock, especially as the company doesn't have the fundamentals to support its soaring price. Trump Media lost $58 million in 2023, with revenue of just $4.1 million.
Trump currently owns more than 57% of the company's stock. Unless Trump buys shares in an initial public offering, Mr. Trump will own just under half of the company's publicly traded shares after issuing additional shares.
But the company needs money. The company said its ability to continue operating is in serious doubt. The company is barely making any money, losing millions of dollars, and is losing a lot of users as well.
The stock offering is not directly related to Trump's criminal trial, which begins Monday, but the company warned potential investors that Trump's ongoing legal proceedings could harm its reputation. He pointed out that this poses a risk to the brand.
“President Donald J. Trump is the subject of numerous legal proceedings. An adverse outcome in one or more of the ongoing legal proceedings could adversely affect TMTG.” says the company. “If President Donald J. Trump is unable to devote more time to Truth Social, TMTG's business will be adversely affected.”
This is a developing story and will be updated.
