Trump Media shares tank after filing shows more stock may be sold

5:11 pm Tuesday, April 16th, 2024

By Echo Wang

(Reuters) -Shares of Donald Trump’s social media company slumped 18% on Monday, extending losses since the stock’s debut last month, after the company said it could sell millions of shares in coming months, including the former president’s entire stake.

Trading in Trump Media & Technology Group, which operates Truth Social, has been volatile since its listing on March 26, attracting both loyal Trump fans and short sellers who see the stock as wildly overvalued.

The stock already has fallen nearly 60% since it opened on its first day of trade at $70.90, after a blank-check merger with Digital World Acquisition Corp. The shares closed down 18.4% at $26.61.

Monday’s filing, known as a registration statement, is considered standard after a company goes public through a special purpose acquisition company, or SPAC. These “blank check” entities raise capital through an initial public offering to acquire or merge with a company that is not publicly traded.

In the vast majority of these mergers, the company is contractually required to file a resale statement for parties who may not be able to sell their shares freely without the registration, said Peter Byrne, a securities lawyer at Cooley LLP who specializes in the process of going public.

“It’s completely standard,” Byrne said.

Bankers and lawyers told Reuters while the filing does not indicate any imminent intention to sell from affiliates of the company, it does clear the way for Trump to sell his shares after the lock-up is expired or waived.

The filing showed a potential sale of 146.1 million shares, including Trump’s stake of 114.8 million shares, divided between the 78.75 million he owns and an additional stake he could receive if certain performance-based measures are achieved.

The filing also listed an additional 21.5 million shares that could be sold upon the exercise of certain warrants issued when the company went public.

Trump, the Republican candidate for president in the November election, is on trial in a Manhattan court related to hush money payments to a porn star. He has pleaded not guilty.

(Reporting by Herbert Lash and Echo Wang in New York, Yuvraj Malik in Bengaluru, additional reporting by Yuvraj Malik in Bengaluru; Editing by Anil D’Silva, Sharon Singleton, Jonathan Oatis and Richard Chang)