Fortune reports: “Trump Media lockup deadline leaves Trump with a choice: trigger a fire sale or hold a meme stock”
Per Fortune reporting:
“Presidents can move entire markets with a single sentence. Donald Trump, a former president, sent a single stock soaring with just three words: “I’m not selling,” he pronounced at a press conference on Sept. 13, when asked whether he would offload the millions of shares he owns in his social media company. Buoyed by this declaration of faith from its largest shareholder, the stock shot up 27% to $20.76, before closing the day at $17.97.
Later this month, for the first time since Trump Media & Technology Group (TMTG)—which owns Truth Social—went public, Trump will be allowed to sell his shares in the company. As the former chair of TMTG and a major insider, Trump is subject to a “lockup” provision that prevents insiders from selling stock in the newly public company before a certain date.
The lockup period for Trump, who owns about 57% of TMTG and is its largest stakeholder, will expire on Sept. 25 at the latest. If TMTG’s stock remains above $12, the lockup could end as early as Thursday, Sept. 19—a feat that looks increasingly likely. The price hasn’t dropped below $15 on any trading day since Aug. 22.
Trump currently owns 114.5 million shares of TMTG (ticker symbol: DJT), which are worth about $1.85 billion.
Trump’s stake in TMTG is likely a significant portion of his wealth. Forbes estimates Trump’s net worth to be about $3.7 billion, meaning the paper value of his TMTG shares would account for about 50% of his total wealth. Of course, as with anyone whose wealth is tied up in company stock, Trump’s net worth can fluctuate regularly with changes in the share price.
As the lockup expiry date approaches, Fortune looked through dozens of SEC disclosures to examine the condition of TMTG. We found a company with a market cap of $3.1 billion—an almost inexplicable valuation given that the underlying enterprise is no larger than the size of a small family business. It has declining revenues, no profits, and is embroiled in multiple lawsuits. The company even confesses it made material misstatements in its financials reporting with no clear timeline of when it will be able to remedy them.
And—crucially for the company and anyone holding its shares—its future is largely tied up with the decisions of its largest individual shareholder: Donald Trump. The filings acknowledge Trump’s personal financial interests may hurt his investors because he has a right to vote his shares in ways that “may not always be in the interests of the Combined Entity’s stockholders generally.”
Insiders at newly public companies approaching the end of a lockup period will often communicate with the board to devise a plan to sell their stake incrementally over time and avoid a free-for-all in the market, according to Michael Ewens, a finance professor at Columbia Business School. “Everyone realizes selling it all is bad,” he says. “There’s a good reason for that; they don’t want the share price to tank.”
If insiders, especially Trump, rushed to offload as many shares as possible when the lockup period ended it would trigger a fire sale. Shareholders, many of whom are retail investors who bought the stock as a show of support for Trump, could see their investments greatly devalued or wiped out. But, as the largest shareholder of the company, no one would have more to lose from a cratering TMTG share price than Trump. The ensuing price drop could make whatever shares he wasn’t able to sell almost worthless, according to Jay Ritter, a professor at the University of Florida Warrington College of Business who studies public offerings.
But holding on to TMTG stock poses its own set of risks, namely that its share price appears entirely divorced from its underlying business results, trading mostly on the fervent devotion Trump inspires in his followers rather than any market fundamentals. That means Trump, as by far the largest shareholder, is caught between a rock and hard place.
He can flood the market with shares knowing that whatever he doesn’t manage to sell will be worth a fraction of their original value. Or he can hold on to them and face the daunting prospect of turning TMTG and Truth Social into a genuine tech and media business.”
“Presidents can move entire markets with a single sentence. Donald Trump, a former president, sent a single stock soaring with just three words: “I’m not selling,” he pronounced at a press conference on Sept. 13, when asked whether he would offload the millions of shares he owns in his social media company. Buoyed by this declaration of faith from its largest shareholder, the stock shot up 27% to $20.76, before closing the day at $17.97.
Later this month, for the first time since Trump Media & Technology Group (TMTG)—which owns Truth Social—went public, Trump will be allowed to sell his shares in the company. As the former chair of TMTG and a major insider, Trump is subject to a “lockup” provision that prevents insiders from selling stock in the newly public company before a certain date.
The lockup period for Trump, who owns about 57% of TMTG and is its largest stakeholder, will expire on Sept. 25 at the latest. If TMTG’s stock remains above $12, the lockup could end as early as Thursday, Sept. 19—a feat that looks increasingly likely. The price hasn’t dropped below $15 on any trading day since Aug. 22.
Trump currently owns 114.5 million shares of TMTG (ticker symbol: DJT), which are worth about $1.85 billion.
Trump’s stake in TMTG is likely a significant portion of his wealth. Forbes estimates Trump’s net worth to be about $3.7 billion, meaning the paper value of his TMTG shares would account for about 50% of his total wealth. Of course, as with anyone whose wealth is tied up in company stock, Trump’s net worth can fluctuate regularly with changes in the share price.
As the lockup expiry date approaches, Fortune looked through dozens of SEC disclosures to examine the condition of TMTG. We found a company with a market cap of $3.1 billion—an almost inexplicable valuation given that the underlying enterprise is no larger than the size of a small family business. It has declining revenues, no profits, and is embroiled in multiple lawsuits. The company even confesses it made material misstatements in its financials reporting with no clear timeline of when it will be able to remedy them.
And—crucially for the company and anyone holding its shares—its future is largely tied up with the decisions of its largest individual shareholder: Donald Trump. The filings acknowledge Trump’s personal financial interests may hurt his investors because he has a right to vote his shares in ways that “may not always be in the interests of the Combined Entity’s stockholders generally.”
Insiders at newly public companies approaching the end of a lockup period will often communicate with the board to devise a plan to sell their stake incrementally over time and avoid a free-for-all in the market, according to Michael Ewens, a finance professor at Columbia Business School. “Everyone realizes selling it all is bad,” he says. “There’s a good reason for that; they don’t want the share price to tank.”
If insiders, especially Trump, rushed to offload as many shares as possible when the lockup period ended it would trigger a fire sale. Shareholders, many of whom are retail investors who bought the stock as a show of support for Trump, could see their investments greatly devalued or wiped out. But, as the largest shareholder of the company, no one would have more to lose from a cratering TMTG share price than Trump. The ensuing price drop could make whatever shares he wasn’t able to sell almost worthless, according to Jay Ritter, a professor at the University of Florida Warrington College of Business who studies public offerings.
But holding on to TMTG stock poses its own set of risks, namely that its share price appears entirely divorced from its underlying business results, trading mostly on the fervent devotion Trump inspires in his followers rather than any market fundamentals. That means Trump, as by far the largest shareholder, is caught between a rock and hard place.
He can flood the market with shares knowing that whatever he doesn’t manage to sell will be worth a fraction of their original value. Or he can hold on to them and face the daunting prospect of turning TMTG and Truth Social into a genuine tech and media business.”
