Donald Trump has a big decision to make.
In ten days, the former president will be free to sell his shares in Trump Media and Technology Group (DJT-Q) – the publicly traded parent company of Truth Social, his social network and main online megaphone. A provision that banned him from selling any of his 115 million shares will expire Sept. 19.
His stake is worth US$2 -billion, an enticing bounty given that Mr. Trump invested only a few million dollars into Trump Media, which was formed just weeks after he left the White House in early 2021. But his shares are worth a lot less than they were in March, when Trump Media made its Wall Street debut.
A sale by Mr. Trump would have big implications, both financial and political. It almost certainly would tank the price of Trump Media’s volatile stock, decreasing the value of whatever remains of Mr. Trump’s stake. An ensuing slump in the share price might also leave the company’s more than 600,000 shareholders – many of them supporters of the former president and users of the platform – feeling sabotaged and alienated.
“He has no reason to sell, because he doesn’t need the money,” said Greg Bowden, a 66-year-old self-described day trader and supporter of Mr. Trump who said he owns shares of Trump Media. “I don’t think he’s that stupid to hurt his loyal base of supporters.”
Many investors in Trump Media are deeply in the red, thanks to a sharp drop in the share price over the past few months. But the presence of a large seller like Mr. Trump could swamp buyers in such a thinly traded stock.
“It’s a supply-and-demand story: If you flood the market with shares, you are just not going to find enough buyers,” said Mike Stegemoller, a finance professor at Baylor University. “You don’t want to shock the market. I don’t think he is dumb in that regard. His self-interest may work to the advantage of the shareholders.”
Mr. Trump has some options. Selling shares to a single buyer, in a deal that’s announced after it’s completed, might limit the damage. He could also use the shares as collateral for a loan. Though he wouldn’t be selling, that could still pressure the stock.
A big reason for him to sell some shares? The value of his 57-per-cent stake in Trump Media – which he was given primarily in exchange for lending his name and support to the platform – has fallen by US$4-billion since the company’s Wall Street debut in March and continues to drop.
Trump Media is losing tens of millions of dollars each quarter and struggling to generate sufficient advertising revenue from Truth Social to justify even its current lower valuation. But in many ways the stock trades as a meme stock and a barometer of enthusiasm about Mr. Trump’s candidacy for president. It has been pushed and pulled all summer by debate performances, court cases, the attempt to assassinate Mr. Trump and poll results.
The stock slumped as Vice-President Kamala Harris, the Democratic presidential nominee, caught up to Mr. Trump in national polls. At US$17.90 a share, the price is down 73 per cent since Trump Media shares peaked at US$66.22 in late March, soon after it went public.
Mr. Trump has not given any indication of what he plans to do with his shares. Representatives for his presidential campaign and the Trump Organization did not return requests for comment.
A spokesperson for Trump Media, in an e-mailed response to questions, did not address the issue. Instead, she criticized a New York Times reporter’s recent visit to Trump Media’s headquarters in Sarasota, Fla.
Lock-up provisions are not unusual in public stock listings. They exist to keep insiders from trying to cash out too quickly and driving down the share price.
Trump Media went public through a merger with a cash-rich special purpose acquisition company, or SPAC, called Digital World Acquisition Corp. SPACs raise money from investors with the expectation of finding a private company to buy.
An analysis of two dozen companies that merged with a SPAC and had similar six-month lock-ups found that a month after the restriction had lifted those stocks declined on average by about 9.7 per cent, according to SPACInsider, which collects data on the SPAC market. If Mr. Trump wants to sell shares, several financial and securities experts said, he should probably telegraph his intention to avoid causing a precipitous drop in their price.
“Investors are probably looking for a hint,” said Alan Jagolinzer, an accounting professor at the University of Cambridge. “I might expect to see him say he is going to sell over a specific time period, so the market is aware of it and the market can adjust.”
Any stock sales by Mr. Trump would have to be publicly disclosed with the Securities and Exchange Commission in a Form 4 filing within two days.
If Mr. Trump borrows against his holding, or negotiates a private sale to a wealthy investor or financial institution, he will still have to disclose the move to investors in a regulatory filing as one of the company’s largest shareholders. So any move to cash in on his shares could still send a negative message to investors, Prof. Jagolinzer said.
Judging from comments on several message boards on Truth Social and interviews with several investors, most shareholders do not expect Mr. Trump to sell anything but a token number of shares.
Chad Nedohin, a part-time pastor who has been one of Trump Media’s more outspoken fans on Truth Social, said he didn’t expect Mr. Trump to sell, but was worried that other large shareholders would dump big blocks of stock after the lock-up ended.
A group of early investors in Digital World and two of the original founders of Trump Media will also be free to begin selling Sept. 19. Each group controls about 11 million shares or, together, about 11 per cent of the publicly traded stock, according to regulatory filings.
For months, Trump Media has been embroiled in litigation with the two founders of Trump Media, Andy Litinsky and Wes Moss, over just how many shares the pair – both former contestants on Mr. Trump’s old reality television show, The Apprentice – are entitled to. On Aug. 30, a judge in Florida rejected an attempt by Trump Media to block them from selling shares when the lock-up ends.
“I think they’re going to dump,” Mr. Nedohin said of Mr. Litinsky and Mr. Moss, noting their legal dispute with Mr. Trump. “Why? Because they’re mad.” (Mr. Nedohin later posted on Truth Social that he thought Mr. Litinsky and Mr. Moss would hang on to some of their shares.)
Christopher Clark, a lawyer for the two men, declined to comment. At the Aug. 30 court hearing, he said his clients would not “do anything to intentionally drop the stock price.”
The group that will be free to sell shares includes more than 100 investors, both individuals and investment entities, according to a court filing. Those investors all invested in Digital World before its September, 2021, initial public offering and the subsequent merger announcement with Trump Media.
Some Trump Media investors said that as long as Mr. Trump didn’t sell, they were willing to ride out any further decline in the share price in the hope that he would win the election.
Several investors said big Wall Street investment firms and short sellers – bearish investors looking to profit from falling stock prices – were behind the plunge in the share price. “This is a heavily manipulated stock,” said Robert Morris, 68, who occasionally posts on Truth Social.
That echoes Trump Media’s claims, in several letters to regulators and Republicans in Congress, that its shares were being manipulated.
Mr. Morris, who is retired and supports Mr. Trump, said he had lost money on his investment but didn’t want to give in to outside pressure that would like to see Trump Media and Truth Social fail.
“I am content to wait and see what happens,” he said.
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