Trump Media, the newly merged company, filed a form with the SEC in mid-April to register all its shares for sale, potentially leading to a large selloff. The company disclosed that it had over 204 million shares of common stock outstanding, including Earnout Shares and Alternative Financing Shares. The Selling Securityholders will have control over when and how they dispose of these shares, with Donald Trump possibly requesting a release from the 6-month waiting period for his majority holding of 114,750,000 shares. This could result in a higher ratio of sellers to buyers in the market.
Despite recent stock price increases, investors are cautioned not to base future trends on past performance. Many shareholders have acquired their shares at low prices and may prefer to cash in on their profits and move on. Additionally, there is a psychological trend reversal effect that could lead to worry-based selling if the stock weakens. The stock peaked at $70 a month ago, dropped to the low $20s, and has since risen to around $40. A break below the $35 level could trigger further selling.
The advice given to investors is not to wait and see if floodwaters are truly rising, as by then it may be too late to save their investments. Successful investors are known for selling too soon rather than too late, as they can always buy back if the market conditions improve. It is better to protect profits and seek opportunities in other areas where the market is more stable. Waiting for confirmation of a market downturn can result in significant losses.
While the stock market is unpredictable and subject to rapid changes, investors should remain cautious and proactive in managing their investments. With the potential for a large selloff looming, it is important to assess the current market conditions and take appropriate measures to protect their assets. Selling at the first sign of trouble may seem premature, but it can ultimately save investors from significant losses in the long run.
Ultimately, investors must weigh the risks and rewards of holding onto their shares in Trump Media. With the uncertainty surrounding the company’s future prospects and the potential for a flood of shares hitting the market, it is advisable to err on the side of caution and consider selling before a market downturn occurs. By staying vigilant and making informed decisions based on market trends, investors can safeguard their investments and position themselves for success in a volatile market environment.
