The Trump Media & Technology Group (DJT) is now publicly traded, but there are risks involved. The stock has no support, either fundamental or technical, for its price. The $10 floor that was previously mentioned is no longer guaranteed. The company must now focus on producing good fundamentals to attract investors.
Furthermore, the company’s moderate business operations and growth, along with negative earnings, add to the risks for stock investors. The benefits of the merger between Digital World Acquisition and Trump Media are limited, with no concrete business advantages to boost sales, earnings, or growth. The cash injection from the merger is not necessarily a positive, as it often does not translate into sustainable growth or profits.
Additionally, the earnout bonus offered to investors may not be as beneficial as it seems. The bonus is tied to specific stock price hurdles, which could lead to dilution of existing shares if triggered. Donald Trump has a similar bonus plan but with more shares than other shareholders, which could impact the stock price and earnings per share negatively.
With Trump owning over 50% of Trump Media stock, he holds a controlling interest in the company. This means that he has significant power over decision-making and governance, potentially impacting shareholder protections. The structure of Trump Media may not provide the same safeguards and assurances as other publicly traded companies, making it a riskier investment.
The presence of “founder shares” in the company also poses a risk to per-share values. These shares, acquired at a bargain price before the public offering, can lead to a significant drop in per share book value after a deal is completed. This is a common feature in SPAC deals that may impact shareholder returns and overall investment performance.
Investors should not let the personality of a company CEO, such as Donald Trump, overshadow the risks associated with an investment. While it is important to consider the leadership of a company, it should not override sound investing strategies or risk assessment. It is crucial to carefully evaluate all aspects of an investment opportunity, including financial fundamentals and potential risks, before making a decision.
