Trump Media shares plummet as lockup period ends, raising questions about the future of Truth Social’s parent company.
At a Glance
- Trump Media shares dropped nearly 6% as the six-month lockup period expired
- Major investors, including Donald Trump, can now sell their shares
- Trump, holding a 57% stake worth $1.7 billion, declares no intention to sell
- Truth Social struggles with user growth, reporting less than 1 million daily active users
- Stock volatility closely tied to Trump’s political activities and campaign performance
Trump Media Shares Face Selling Pressure
Trump Media, the parent company of Truth Social, experienced a significant drop in share price as the six-month lockup period came to an end on Thursday. The stock closed down nearly 6% at $14.70, marking a stark contrast to its post-merger high six months ago. This development allows major investors, including former President Donald Trump, to sell their shares in the company for the first time since its public debut.
The expiration of the lockup period has raised concerns about potential selling pressure on the stock. S3 Partners, a financial analytics firm, suggests that an increase in shares available for trading could facilitate short selling, potentially leading to further downward pressure on the stock price.
Trump’s Stake and Intentions
Despite the stock’s downturn, Trump, who holds a majority 57% stake in the company valued at approximately $1.7 billion, has publicly stated his commitment to retaining his shares. In a recent press conference, Trump emphatically declared, “No, I’m not selling. No, I love it,” which briefly sparked a 25% rally in the stock.
“Trump, the majority owner with a 57% stake now valued at around $1.7 billion, said last week that he has no intention of selling his position — a move that would effectively devalue the stock.”
However, other large investors controlling over 20 million shares may now begin to sell, potentially impacting the stock’s performance in the coming days and weeks.
Truth Social’s Struggles and Market Challenges
Truth Social, the platform at the heart of Trump Media, has faced significant challenges in gaining traction in the competitive social media landscape. As of April, the platform reported less than 1 million daily active users, a fraction of the user base of major competitors. This struggle for growth has raised questions about the company’s long-term viability and revenue potential.
“He’s since been reinstated to both — and endorsed by X owner Elon Musk — but he still mostly posts on his own platform.”
Trump Media’s financial performance has also been a cause for concern. The company reported a loss of around $344 million on revenue of less than $2 million in the first half of the year. With its revenue entirely dependent on ad sales from Truth Social, the platform’s small user base compared to other social media sites poses significant challenges for future growth and profitability.
Stock Volatility and Political Influence
The stock’s performance has been notably volatile, with significant fluctuations often coinciding with Trump’s campaign activities and political events. For instance, the stock surged after Trump survived an assassination attempt but fell again as Kamala Harris replaced Biden as the Democratic nominee. Similarly, the stock rose before the September 10 presidential debate but plummeted after Trump’s perceived poor performance.
“Trump Media has acknowledged in regulatory filings that the end of the lockup could spur large sales of the company’s stock, and even the market’s perception of a sell-off could drive down DJT’s stock price.”
As Trump Media navigates these challenges, the company’s fortunes remain closely tied to Trump’s use of Truth Social and his political career. With the stock already down more than 76% from its post-merger high, investors and analysts will be watching closely to see how the company fares in the coming months, especially as the 2024 presidential election approaches.
