Truth Social’s parent company, Trump Media & Technology Group (TMTG), announced that additional shares had been declared effective by the Securities and Exchange Commission, allowing early investors to exercise public warrants they hold in the company. This could result in over 14 million shares being issued, potentially generating up to $247 million in proceeds if all warrants are exercised for cash. Despite this milestone, the company’s share price dropped nearly 10 percent on the same day, raising concerns about the dilution of existing stock value.
TMTG CEO Devin Nunes stated that the registration of additional shares marked a milestone for Truth Social, and the company was looking to pursue TV streaming, enhancements to the platform, and potential mergers and acquisitions. With approximately 620,000 retail shareholders backing their vision, TMTG aims to expand quickly and robustly. However, the increase in available shares could negatively impact the value of existing stock, as noted in an SEC filing by the company. Concerns were raised about potential declines in share price if warrant holders sold their shares, or if there was a perception that sales could occur.
Truth Social, launched in February 2022, was created after former President Trump was banned from major social media platforms for his posts regarding the January 6 Capitol riots. Despite being reinstated to these platforms, Trump opted to use Truth Social. TMTG reported having over $200 million in the bank, positioning itself well for growth at an early stage. In addition to potential cash warrants, the company mentioned that $40 million of restricted cash on its balance sheet would become unrestricted, supplementing the existing $200 million in unrestricted cash. However, Trump experienced a significant loss of approximately $267 million due to the declining share price in TMTG.
The drop in TMTG’s share price coincided with Trump’s guilty verdict on 34 counts in the Stormy Daniels hush money trial. This led to further decline in the company’s stock price, closing at $31.31 per share and dropping to $27.07 in after-hours trading. The SEC’s decision to allow warrant holders to exercise their shares could have contributed to the decline. Trump’s association with the company has drawn attention to its performance, with questions raised about the impact of his involvement on Truth Social and TMTG’s financial outlook.
TMTG’s focus on expanding Truth Social and pursuing new opportunities in TV streaming and other enhancements highlights its growth strategy. The company’s ability to raise capital through the exercise of warrants and access to unrestricted cash provides a strong financial foundation for future endeavors. Despite challenges such as share price fluctuations and concerns about dilution, TMTG aims to leverage its resources and investor support to drive growth and advance its position in the media and technology landscape. The company’s outcomes will be closely monitored as it navigates the evolving market and competitive dynamics in the social media industry.
