Trump shares plummet after sell-off announcement

(CNN) –– Shares of Trump Media & Technology Group fell again on Monday after the company announced another major stock influx was possible. A struggling company is losing money quickly, and a new stock offering could help it stay afloat.

But there’s a downside to returning to the market with more shares: The 21.5 million additional shares announced for sale this Monday will add more than 15% to those already publicly available from owner Truth Social. This would significantly devalue the assets of existing shareholders, including former President Donald Trump. This means the price of millions of shares will fall.

This new measure aims to record all actions related to the merger that allowed Trump Media to go public, including those related to guarantees. Warrants give the holder the right to buy shares of a company at a specific price.

“The thinking is that they are going to exchange the warrant for a share and then immediately sell those shares,” said John Rekenthaler, vice president of research at Morningstar.

Matthew Tuttle, chief executive of Tuttle Capital Management, says management would be “foolish” not to sell more shares, although the move would upset shareholders.

TMTG shares fell more than 18% on Monday afternoon. The stock price has soared in recent months in anticipation of a takeover company merging with Trump’s media business. But it has lost more than 60% of its value since its peak on March 26, the day after the merger was completed and it began trading publicly as TMTG.

However, the stock’s decline from this recent move will likely be temporary, Tuttle said.

“This will make some people angry. Other people may see this and try to buy the fund,” he said. “As long as Trump is somehow in the news, it will be a meme event. 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 the March 27 closing price of $66.22 lost more than half their money. The sharp decline has hurt Trump’s net worth. The former president’s stake was valued at $5.2 billion based on the closing price of Trump Media shares. It had fallen to about $2.3 billion as of Monday morning. On Monday, Trump’s net worth fell by about $400 million as stocks fell.

The new measure also seeks to register more than 146 million shares held by certain shareholders for resale, including Trump’s total of 114.8 million shares: 78.8 million current shares and a potential 36 million shares that could be awarded if the price will remain above a certain level.

While they won’t be able to sell those shares immediately, the decision means they will be one step closer to doing so once the rest of the bans are lifted, including the six-month lock-up period, says Michael Ohlrogge, an assistant professor. at New York University School of Law.

Why Trump Media Stocks Are So Volatile

There are several reasons why stocks are astonishingly volatile. The company is linked to Trump, a controversial political figure whose connection to the stock has drawn scrutiny. Trump Media’s public debut also marked the former president’s return to Wall Street after years of regulatory and legal hurdles.

Experts have warned retail investors to be cautious if they decide to trade the stock, especially since the company has no fundamentals to back up its sky-high valuation. Trump Media lost $58 million in 2023 and earned just $4.1 million in revenue.

Trump currently owns more than 57% of the company. If he doesn’t buy shares in a new public offering, Trump will own just under half of the company’s publicly traded shares after it issues more shares.

But the company needs money. The company said it had serious doubts about its ability to continue operating. The company generates little revenue, loses millions of dollars, and also loses many of its users.

While the stock offering was not directly related to Trump’s criminal trial, which began Monday, the company warned potential investors that ongoing legal proceedings against Trump pose a threat to the company’s reputation and brand.

“President Donald Trump is the subject of numerous lawsuits. “An unfavorable outcome in one or more ongoing litigation could adversely affect TMTG,” the company said. “If President Donald Trump were unable to devote significant time to Truth Social, TMTG’s business would be negatively impacted.”

CNN’s Matt Egan contributed to this report.