Trump's DJT Stock: A Potential Payday with Risks
Former US President Donald Trump is on the verge of being able to sell his multi-billion pound stake in his fledgling social media startup, Trump Media & Technology Group. This potential windfall, representing more than half of Trump's reported net worth, poses risks for both the Republican presidential nominee and his company.
Trump owns 114,750,000 shares, or nearly 59%, of Trump Media, which owns the social media platform Truth Social. As of last Thursday, this stake was valued at slightly over £2.1 billion. However, Trump, along with other early investors, are currently barred from selling any shares due to a "lockup agreement," a common feature of initial public offerings designed to prevent insiders from immediately cashing out.
This lockup period, which commenced after the company's merger with a special purpose acquisition company (SPAC), is scheduled to end on 25 September. However, it could be lifted earlier if the stock price, trading under the ticker DJT on the Nasdaq, remains at or above £9.70 per share for any 20 trading days within a 30-day period starting this Friday. If DJT shares maintain this price, the lockup could expire as early as 20 September.
Trump's intentions regarding his shares once the lockup expires remain unclear. A spokesperson for Trump Media has not commented on the matter, and a spokesperson for Trump's presidential campaign referred inquiries to the company.
Experts caution that Trump may face difficulty finding buyers for his stake, particularly if he decides to sell all or a significant portion. A large-scale sell-off could significantly impact the stock price, as noted by Trump Media in a Securities and Exchange Commission filing. The company acknowledged that the sale of a substantial number of shares could negatively affect the market price of DJT.
While cashing out could provide a significant financial boost for Trump, who is facing substantial legal costs, it would likely damage investor confidence in Trump Media. The company's success is largely dependent on Trump's popularity and reputation, making him its main draw. Investing in Trump Media has been seen as a way to support Trump or bet on his chances of winning the upcoming presidential election.
This "meme stock" dynamic has benefited Trump, as the company's multi-billion pound market capitalisation has remained consistently high despite wild fluctuations in its share price over the past five months. The company's sole product, Truth Social, generates relatively little traffic and advertising revenue compared to established social media giants like X and Facebook. Financial experts argue that Trump Media's valuation doesn't align with its fundamentals.
The company's performance has been linked to Trump's political fortunes. Following an attempted assassination at a campaign rally in mid-July, Trump's odds of winning the election improved in betting markets, and Trump Media stock surged by over 30% the following day. However, the company has faced a significant stock decline in recent weeks, coinciding with Vice President Kamala Harris's rise to prominence as the Democratic nominee. Recent polls show Harris closing the gap or overtaking Trump both nationally and in key swing states.
Despite its fluctuating price, Trump Media's share price has fallen by 71% from its post-merger peak of nearly £65 per share as of last Thursday's close. This decline may be attributed to the company's limited revenue and its reliance on Trump's political success.
The future of DJT stock remains uncertain, and its trajectory will likely be heavily influenced by the outcome of the upcoming US presidential election. Trump's success or failure in the election will have a significant impact on the company's value and its appeal to investors.
