Trump Media & Technology Group plunged again Thursday after regulators approved its registration statement, clearing the way for investors to exercise warrants and for the company to issue additional shares, making millions more available for trading.
Warrants, which reward investors by letting them exchange their holdings for shares in the company, can dilute the value of shares held by common shareholders. Typically, some investors who exercise warrants will sell the stock, putting pressure on the stock.
The social media company behind Trump’s go-to social media platform Truth Social fell 13% to $27 during the trading day Thursday.
The former president and Republican candidate has lost billions in paper wealth since early June. As Trump Media’s largest shareholder, he has nearly 115 million shares worth about $3 billion, up from more than $5 billion. Trump and other insiders are not allowed to sell shares until September, unless the board waives that restriction or extends the lock-up period.
The stock’s long decline began after the former president’s guilty verdict on all 34 crimes in his criminal hush-money trial. Trump Media, which trades under the vanity ticker “DJT,” is down 48% since May 30, when a New York jury found Trump guilty of falsifying company records.
Trump Media welcomed the news that the registration statement had been declared effective. The warrants could add up to $247 million to Trump Media’s balance sheet.
“We expect to be well positioned to vigorously pursue TV streaming, other platform enhancements and potential mergers and acquisitions,” Trump Media Chief Executive Officer Devin Nunes said in a statement.
Nunes has written letters to Congress and other regulators asking for an investigation into “naked” short selling, an illegal form of short selling that he blames for volatility in the company’s stock.
Short sellers don’t actually own the shares, but borrow them and then sell them, betting that the shares will fall so they can buy back the shares at a lower price and keep the difference. Naked short selling involves betting that a stock will fall without borrowing or owning the stock.
Trump Media has been volatile since its IPO earlier this year, rising to $79.38 after its debut before falling to $22.55.
Its market cap, which has fallen below $5 billion, rests almost entirely on the Trump brand and his loyal following, including retail investors who have shown their support for him by backing the stock.
The developments only add to the uncertainty that has surrounded Trump Media stock since it began trading in March following its merger with shell company Digital World Acquisition Corp.
In the battle for advertising money and attention with major social media companies such as Facebook, TikTok and YouTube, Trump Media is a far behind. It reported a first-quarter net loss of $327.6 million on revenue of less than $1 million.
This article originally appeared on USA TODAY: DJT stock in free fall? Trump Media dives in again. This is why.
