Shares of Trump Media plummeted over 15% on Monday following the company's announcement that it plans to issue millions more shares. This significant drop occurred as Donald Trump attended the beginning of his criminal trial in Manhattan related to hush money charges, where he holds a majority stake in the company.

The company, known for the Truth Social app and trading under the DJT ticker on Nasdaq, experienced nearly a 20% decrease last week alone. Since its market debut on March 26, Trump Media's stock has declined by over 62%, dropping from an initial $70.90 to about $27.

This downturn has drastically reduced the company's market capitalization by almost $6 billion, bringing it to approximately $3.7 billion.

Details from a preliminary prospectus filed with the Securities and Exchange Commission indicate Trump Media's plan to issue over 21.4 million shares, activated through the exercise of stock warrants. These warrants allow holders to purchase stock at a set price within a specified period.

From these warrants, Trump Media anticipates generating roughly $247.1 million, according to the filing. The company's stock warrants, trading under "DJTWW" on Nasdaq, saw an 8% decline by Monday morning.

Additionally, the filing includes plans for up to 146.1 million shares to be resold by current securityholders, with 114.8 million shares owned by Trump himself. Currently, Trump owns 78.8 million shares and could acquire an additional 36 million "earnout shares" provided the stock remains above $17.50 for a sufficient number of trading days.

Trump’s current holdings—nearly 60% of the company's stock—were valued over $2.2 billion based on Monday’s stock price. However, he cannot sell his shares until a six-month lockup period concludes, a stipulation from Trump Media's recent merger with Digital World Acquisition Corp completed on March 25.

Despite Trump's efforts to shift his social media presence to Truth Social after being banned from Twitter and Facebook in 2021, it remains unclear how successful these endeavors have been as the company has not disclosed any key performance metrics like active user count.

Last year, Trump Media reported a substantial net loss of $58.2 million against a revenue of just $4.1 million. Ben Silverman from Verity Research commented on the company's valuation disconnect from its financial reality. Nonetheless, if the stock maintains a high enough price, Trump and other insiders stand to gain significantly from the potential issuance of earnout shares, potentially exceeding $1 billion at current market prices.

source: https://www.cnbc.com/2024/04/15/trump-media-shares-plunge-after-company-files-to-issue-additional-djt-stock.html