Shares of Trump Media & Technology Group, the parent company of the social media platform Truth Social, took a hit at the opening of Thursday's trading session, with the stock falling 5%. The drop comes just hours before the expiration of a lockup agreement that has restricted former President Donald Trump, who holds a nearly 57% stake in the company, and other insiders from selling their shares. The expiration could potentially lead to significant stock sales, causing uncertainty in the market.
As the lockup period is set to expire Thursday afternoon, investors are bracing for the possibility of a sell-off. Trump Media went public in late March following a merger with a special purpose acquisition company (SPAC), Digital World Acquisition Corp. Under the terms of the lockup, early investors, including Trump, were prohibited from selling shares for approximately 180 days.
The company has acknowledged in regulatory filings that the end of this lockup period could result in a large number of shares hitting the market, putting downward pressure on the stock. The mere anticipation of significant stock sales could drive prices lower, as evidenced by Thursday's early trading losses. As of the morning, Trump's stake in the company, which trades under the ticker DJT on the Nasdaq, was worth approximately $1.7 billion, nearly half of his estimated on-paper net worth.
Despite market concerns, Trump has publicly stated that he has "absolutely no intention of selling" his stake. His continued involvement with Truth Social, which has become the platform of choice for the former president, is crucial for the company's valuation. Trump's active use of the platform has been one of the main drivers of its popularity among his base and retail investors.
Nonetheless, the potential for other insiders to sell their shares remains a key concern. While Trump himself may hold on to his shares, other early investors could take the opportunity to cash in once the restrictions are lifted. The looming threat of a wave of sales has introduced volatility into Trump Media's stock, which has been on a rollercoaster ride throughout 2024, reflecting both Trump's political fortunes and market conditions.
The company's stock had previously surged during its public trading debut, with shares trading as high as $79. However, it has since experienced a prolonged slump, aligning with challenges surrounding Trump's tumultuous presidential campaign against Democratic nominee Kamala Harris. Just last week, DJT shares saw a brief 25% spike after Trump's statement reaffirming his commitment to the company, but the rally was short-lived as concerns about the lockup expiration persisted.
The stock's performance earlier this week further highlighted its volatility. Shares dropped more than 6% on Tuesday following a Delaware court ruling that Trump Media had breached a contract with ARC Global, an early investor. The court decision required the company to grant ARC Global a larger portion of its stock than originally planned, a development that added to the uncertainty around the company's share supply. ARC Global, which holds a 4.77% stake in Trump Media, could now be positioned to sell its shares when the lockup period ends.
As Thursday's lockup expiration looms, market observers are closely watching how the stock will react. Trump Media's fortunes are inextricably tied to those of its founder and primary user, Trump. While the former president's steadfast refusal to sell his stake offers some reassurance to investors, the broader question of how many other insiders will opt to sell remains unanswered.
The company's volatility is compounded by its political context. Trump's re-election campaign and ongoing legal battles have created a high-stakes environment for Trump Media. The former president's use of Truth Social to communicate directly with his supporters continues to be a key factor in the platform's value, but the company's ability to maintain its current valuation hinges on more than just Trump's involvement. It faces broader market pressures, competition from other social media platforms, and legal challenges that could shape its future.
