Shares of Trump Media & Technology Group (TMTG) tumbled to a record low at the opening bell on Friday, marking the first trading day when former President Donald Trump, the company's largest shareholder, could sell his stake. The drop comes after "lockup" restrictions expired, which had previously prevented Trump and other early investors from offloading their holdings.
TMTG shares fell by nearly 7%, hitting $13.73-a new 52-week low for the company that manages Trump's social media platform, Truth Social. This plunge places the company's market value at under $3 billion, a sharp decline from its peak valuation when it first went public.
Trump, who owns more than 115 million shares, or over half of TMTG, now holds a stake worth about $1.6 billion, at least on paper, based on Friday's trading price. The company's stock has been highly volatile since it went public in March, often responding to developments involving the former president. While Trump stated last week that he had no immediate plans to sell his shares, the market's reaction suggests fears of a potential sell-off from major stakeholders.
Since TMTG's initial public offering, its stock has experienced significant swings, with much of the movement tied to Trump's political fortunes. The company's shares saw a brief rally of nearly 12% last week when Trump assured that he wouldn't sell his shares as the lockup period expired. However, earlier this month, the stock took a more than 10% dip following the second presidential debate between Trump and Vice President Kamala Harris.
The company's stock reached its highest point shortly after its Nasdaq debut in March, peaking at $79.38 per share. Since then, its value has steadily declined as TMTG has struggled to turn its digital platform, Truth Social, into a profitable venture. TMTG, based in Sarasota, Florida, launched the platform after Trump was banned from Twitter and Facebook following the January 6, 2021, Capitol riot. However, financial struggles have persisted. According to regulatory filings, TMTG lost nearly $58.2 million last year while generating only $4.1 million in revenue.
The expiration of the lockup period has raised concerns that Trump or other major stakeholders could begin offloading their shares, further driving down the stock price. Such lockup agreements are standard practice when a company goes public, preventing large shareholders from selling for a designated period to stabilize stock prices. With the restrictions now lifted, insiders are free to sell, but doing so could trigger a mass sell-off, further depressing the stock's value.
Trading volumes on Friday were significantly higher than average, though it may take days before public filings reveal whether the heightened activity was due to insiders selling shares or increased trading by retail investors. Regulatory filings also suggest that even if large stakeholders haven't sold off significant amounts of stock, the perception that a sell-off is looming could exert downward pressure on TMTG's stock.
In addition to the ongoing volatility in its stock price, TMTG faces other challenges. The company has struggled to secure additional revenue streams beyond its social media platform, raising concerns about its long-term profitability. Despite early excitement surrounding Truth Social, the platform has not managed to significantly expand its user base or generate substantial ad revenue, particularly in the competitive landscape of digital media.
For Trump, who retains a significant financial and personal investment in the platform, the falling stock price may impact his personal wealth, although it remains to be seen if he will choose to sell off his shares anytime soon. While it is typically not in the best interest of large shareholders to sell off large portions of their holdings due to the risk of exacerbating stock declines, the uncertainty surrounding TMTG's future could tempt insiders to cash in while the stock still holds some value.
