Trump Media & Technology Group (TMTG), the parent company of Truth Social, announced a significant milestone on Tuesday as additional shares registered earlier this year were declared effective by the Securities and Exchange Commission (SEC). This development coincided with a sharp decline in the company's stock price, which fell nearly 10% during regular trading and an additional 17% in after-hours trading.
The SEC's decision allows early investors in TMTG, a company majority-owned by former President Donald Trump, to exercise public warrants they hold. This makes over 14 million shares issuable, potentially raising up to $247 million in proceeds if all warrants are exercised for cash. Despite the potential influx of capital, the increase in available shares could dilute the value of existing stock.
Devin Nunes, CEO of TMTG, described the registration statement as a milestone for Truth Social. "We're expecting to be well positioned to energetically pursue TV streaming, other enhancements to the platform, and potential mergers and acquisitions," Nunes said. "With approximately 620,000 retail shareholders supporting our vision, the company looks forward to expanding quickly and robustly."
However, the prospectus filed with the SEC highlighted the risks associated with the new shares. It noted that if warrant holders sold their shares or there was a perception that these sales could occur, there could be a significant decline in the company's share price. TMTG's stock closed Tuesday at $31.31 per share, nearly 40% lower than its price on May 30, the day Trump was found guilty on 34 counts in the Stormy Daniels hush money trial. It further dropped to $27.07 in after-hours trading.
Despite these market fluctuations, TMTG maintains a strong cash position. According to a statement shared with Just The News, the company has "more than $200 million in the bank." The prospectus also mentioned that $40 million of restricted cash on the company's balance sheet would become unrestricted, supplementing the already substantial unrestricted cash reserves.
The stock's plunge has had a notable impact on Trump's personal wealth, with an estimated loss of $267.4 million over the weekend due to the declining share price. Despite this, TMTG remains focused on its growth and expansion plans, leveraging the new capital for strategic initiatives.
Truth Social was launched in February 2022, roughly a year after Trump was banned from major social media platforms like Twitter and Facebook following the January 6 riots at the U.S. Capitol. Despite being reinstated on these platforms, Trump continues to use Truth Social as his primary social media outlet.
The company's market performance and strategic decisions are closely monitored, with the latest registration of additional shares being a critical move in its growth strategy. However, the potential dilution of stock value poses a challenge to investor confidence.
