The logo of Donald Trump’s Truth Social app is displayed on a smartphone on March 25, 2024.
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Former President Donald Trump will soon be free to begin selling off his multibillion-dollar stake in the fledgling social media startup, Trump Media.
But a potential payday — Trump’s stake accounts for more than half of his paper holdings net worthAccording to Forbes, this poses risks to both Republican presidential candidates and their companies.
Trump holds 114,750,000 shares, or nearly 59%, of Trump Media, which owns the social media platform Truth Social. As of Thursday, his stake was worth just over $2.6 billion.
But under the “lock-up agreement,” Trump and others who acquired shares in the company before it went public are not allowed to sell any of their shares for about 180 days.
These rules, a common feature of initial public offerings, are designed to prevent company insiders from cashing out their shares as soon as the company goes public. This helps keep the stock stable and suitable for investors during its first few months on the market.
Trump Media is listed on Nasdaq under the stock code DJT In late March, following a lengthy merger process with a special purpose acquisition company.
The lock-up restrictions that began after the business combination will end on September 25.
Those restrictions may also be lifted early if the stock price remains at $12 per share or above for any 20 trading days during the 30-trading day period starting Friday, according to the company’s regulatory filings.
If DJT shares remain above this price point, and it seems likely that they will, the lockup period could expire as early as September 20th.
What will happen next is anyone’s guess.
Trump has yet to reveal what he plans to do with his stock once lockdowns are lifted, and a spokesperson for Trump Media did not respond to CNBC’s questions about it.
A spokesman for Trump’s presidential campaign referred inquiries about Trump’s stock to Trump Media.
“If I were to speculate, I would be speculating on the downside, not the upside,” said Daniel Bradley, a finance professor at the University of South Florida.
He pointed out that this view “has absolutely nothing to do with my political views” and “has to do with pure economics.”
If Trump sells
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If Trump chooses to sell all or part of his stake, he may have difficulty finding a buyer — and that possibility itself could affect the stock price.
“If there aren’t enough buyers out there, then, yes, the stock price is ultimately going to have to come down significantly,” Bradley said.
Trump media pointed out In the SEC filing, “substantial shares” of its common stock could be sold “at any time” once the lockup is lifted.
“These sales, or the market’s perception that a large number of stock holders intend to sell their shares, may reduce the market price of DJT shares,” the filing said.
If Trump does sell, he will be required to Disclose transactions In regulatory form within two working days.
That is, “a significant number of insiders” Violation of the U.S. Securities and Exchange Commission According to a 2023 study in the Journal of Financial and Quantitative Analysis, reporting requirements are met by filing open market transactions after legal deadlines.
Cashing in his stake could give Trump a major financial boost as he battles to secure hundreds of millions of dollars. legal penalties It is reported that more than US$100 million In attorney’s fees.
But it could also undermine investor confidence in Trump Media, which noted that Truth Social’s success depends at least in part on Trump’s popularity and reputation as its main appeal.
Investing in the company is seen as a way to support Trump or bet on his chances of defeating Vice President Kamala Harris in the presidential race.
This meme stock dynamic has benefited Trump: While Trump Media’s stock price has swung up and down dramatically over the past five months, its multibillion-dollar market cap has remained elevated relative to its modest revenue.
Trump survived an assassination attempt at a campaign rally in mid-July, and betting markets increased his chances of winning the election. The next day, Trump Media’s stock price soared more than 30%.
But the company’s shares have fallen sharply in recent weeks, which coincided with Harris’ bid to replace President Joe Biden as the Democratic nominee, upending the 2024 race.
Previous polls have shown Trump’s lead over Biden widening, while recent surveys show Harris closing the gap or overtaking Trump nationally and in key battleground states.
Although the stock price fluctuates, as of Thursday’s close, Trump Media’s stock price has fallen 71% from its post-merger peak of nearly $80 per share.
This may be because the company’s only product, Truth Social, generates relatively little traffic and advertising revenue compared to established social media giants like X and Facebook. Financial experts say Trump Media’s sky-high valuations are not related to its fundamentals.
Matthew Tuttle, CEO of Tuttle Capital Management, said the Trump media “is currently a pure proxy for Trump to win the White House.” Tell Politico.
If Trump does win the election, “stocks will be more valuable,” said Bradley of the University of South Florida.
The opposite is true, Tuttle said. Trump’s recent missteps on the campaign trail “have been hurting the stock,” he said.
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