DJT Stock Is Down. What Trump’s Share Award Means for the Truth Social Parent.

Trump Media & Technology Group fell again Tuesday. Its majority owner and former U.S. President Donald Trump is on the brink of being awarded shares worth more than $1 billion in the Truth Social parent.

Trump Media shares tumbled 8.3% to $32.57. The stock closed down 2.4% on Monday as well.

Trump’s nearly 79 million shares in the company were valued at around $2.6 billion at Monday’s closing price. He is in line to receive an additional 36 million earnout shares in the company, currently worth nearly $1.2 billion on paper.

For Trump to receive the maximum award, the stock must stay above $17.50 in 20 out of any 30 trading days during a three-year period following Trump Media’s merger with a special-purpose acquisition company on March 25. The stock was set to fulfill that requirement as soon as the end of trading on Tuesday.

The award doesn’t mean there will be an immediate flood of shares onto the market. Trump is barred from selling Trump Media shares until a six-month lockup period expires in September, although he could seek a waiver from the company’s board, which includes one of his sons and several former members of his administration.

However, it does mean there are more shares that could eventually be sold. Trump Media has previously said the number of shares that could potentially be resold comes to 146.1 million shares, representing about 256% of the shares currently available for the public to trade.

Trump Media’s revenue in 2023 was $4.1 million, and the company posted a net loss of $58.2 million. Its Truth Social platform is a niche player in social media compared with sites such as Reddit or Meta Platforms’ Facebook, although it has announced plans to launch a streaming service.

By normal metrics the stock is significantly overvalued. That would normally make the company a tempting target for short sellers, who aim to make money from a fall in a stock price by borrowing shares and selling them, with the hopes of buying them back later at a lower price. It can be lucrative if the short seller correctly predicts a drop, but there is risk due to the uncapped losses faced if the stock climbs.

However, the limited amount of stock available for trading and its volatile swings make Trump Media a difficult proposition for bearish bets. The company also is looking to make it harder by issuing advice to its stockholders on how to avoid their shares being loaned out.

On Tuesday, Trump Media said in a statement that investors could avoid their shares being borrowed by short sellers by placing their stock in a cash account, opting out of any securities-lending programs or moving their shares to a direct registration account at the company’s transfer agent.

It included a sample letter for retail investors to use to direct their broker not to allow their shares to be made available for lending.

Write to Adam Clark at [email protected]