Note: After I posted this article, the aftermarket trading pushed DJT further down to about $27 on 2.3M shares volume. For an explanation, see Bloomberg article (5:04 PM ET), “Trump Media Sinks as SEC Declaration May Dilute Existing Holders.“
In about two weeks, Trump Media has fallen over 35%. That drop has lit up negative issues. Furthermore, the third quarter’s three critical challenges are coming.
To understand the deterioration, start with this backdrop:
This perspective shows the higher stock prices occurred when excitement and confidence were high. Now investors are wrestling with linking the stock price to Trump Media’s fundamentals and prospects.
What’s happening and what’s coming
Note: For more information about these issues, read my two previous articles:
June 11 – “Trump Media Stock (DJT): The Cause Of This Decline“
June 13 – “Trump Media Stock (DJT) Requires A Unique Fundamental Analysis“
The 2024 technical picture is worsening
The March peak of $80 is history. After the large decline and partial rebound, all three $50 breakout attempts failed, leading to the current price decline. Each technical breakdown opened up a move to lower prices. Add up the technical negatives and the picture darkens…
Additionally, next quarter’s headwinds are strong
Three critical issues are coming, and only a strong, widespread, positive action plan by Trump Media can prevent further weakness.
The first issue is near: The registration of all outstanding shares not yet registered. The amount is three times the currently registered shares: 133 million vs. 44 million, equaling a total of 177 million.
The SEC review is at work, and Trump Media just filed amendment #3 to the original, April 15 S-1 submission. Importantly, when the SEC gives final approval, it will not mean all the shares could be sold. Most of the newly registered shares are restricted by lock-up provisions, meaning they will not be salable until September 25 (six months following the March 25 merger date). All shareholders being free to sell is the third issue in the quarter.
And that takes us back to the number two issue: The August earnings release covering Trump Media’s second quarter through June 30. For the first quarter, the company simply issued a press release and the SEC 10-Q report. That approach for the second quarter would be dangerously inadequate with September’s 133 million newly registered shares suddenly becoming salable by a variety of shareholders, many of whom received the shares in lieu of cash. Likely they will want to sell, particularly if management doesn’t explain the benefits of staying invested.
(See “Trump Media Stock (DJT) – Management’s Earnings Error” for more explanation.)
The bottom line – Trump Media executives need to communicate
Trump Media’s website has the company’s SEC filings and management’s press releases and news reports. A quick review shows the scantiness and repetitiveness of the latter two. Without regular, meaningful communications, knowledgeable investors won’t buy, analysts won’t recommend, and the media won’t report. Therefore, Trump Media executives need to prepare, present, and be ready and willing to respond to questions and concerns.
Read the full article here
