More Bad News for Trump Media (DJT) Shareholders
At the moment, DJT stock is priced at $19.70. That's a new post-merger low. The stock has pierced the psychologically important $20 level. A drop below $20 could signal further drops ahead. That whole-round-number phenomenon is not unique to DJT. It's a factor in all stocks.
Two things have developed that are more ominous to the non-insiders who invested in DJT stock; (1) a standby equity purchase agreement, and (2) insider notifications of their intent to sell.
Both developments mean Trump Media and/or its insiders will be flooding the market with a massive quantity of shares, including millions of newly issued shares. Newly issued shares dilute the value of all shares, driving the stock price lower, and stabbing existing shareholders in the back.
"Shares of a company are essentially slices of a pie. If a company wants to raise cash, it can re-slice the pie, creating more slices but making existing slices smaller. The percentage stake of the company represented by each share shrinks. (
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About the Yorkville Agreement
On July 3, just as the Jul. 4 long weekend began, Trump Media announced they have entered into an agreement with Yorkville Advisors. It's called a "Standby Equity Purchase Agreement."
The deal is done and investors can expect to see it implemented soon. It works like this:
"Companies like Yorkville that offer such deals are not typically intending to hold on to the stock, experts said. They are playing a version of the middleman role, allowing Trump Media to easily sell shares when it wants to. The basic arrangement works like this: Trump Media has the option to sell Yorkville shares of itself up to $2.5 billion, a significant chunk of its current market value. Yorkville was paid a fee up front, and if Trump Media decides to sell shares, Yorkville will also get a discount — 2.75% — off the market price. Yorkville typically would turn around and immediately sell those shares to other buyers, pocketing the difference. (emphasis mine).
"In the July 3 press release announcing the deal, Trump Media CEO Devin Nunes, the Republican former congressman, suggested any share sale would be used to buy assets to build the company’s business. “We've secured a great deal to guarantee access to additional capital, if necessary, to pursue big strategic opportunities as we look to build out our portfolio by acquiring assets and technologies in the Patriot economy,” he said.
"Xavier Kowalski, a securities lawyer who teaches at the University of Florida, said even if Trump Media didn’t spend the cash it raised building its social media business, “you could think of it as a diversification strategy: diversifying away from Truth Social and into just being a pot of cash.”
"The company would have no obligation to spend the money purchasing an asset. It could distribute cash to shareholders — including Trump — in the form of a dividend, for example." (emphasis mine) (
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About the Insider Notifications
As expected and planned, certain Trump Media insiders are going to sell the shares they acquired long before the MAGA dupes jumped in and drove the price higher. They are going to cash out with huge profits at the expense of the dupes. That will happen on or after Sept. 20, when the lockout period ends and these insiders are legally permitted to sell their stock.
Regulations require them to publicly disclose their intent to sell, and they are now doing that. To date, "Trump Media & Technology Group (NASDAQ:
DJT) has registered up to 5.1M shares of stock for eventual sale by certain company shareholders." (
Source)
Trump himself owns about 60% of the shares. He has not yet signaled his intent to sell. If he did, the stock price would instantly plunge. But as a scam operating in plain view, this is working out quite nicely for Trump ... at the expense of the dupes he conned into buying his DJT stock.
The company itself is not profitable. He betrayed the company by restarting his posts on Twitter (X), leaving Truth Social without the exclusive Trump posts they previously had. The original shares are free money to Trump, at the expense of his MAGA dupes, and now, the additional shares that will be generated by the Yorkville deal will be more of the same.
The Yorkville deal will dilute the value of Trump's shares along with everyone else's, but because Trump essentially got all of his shares for free, it's all cash that goes straight into his pocket. Trump will likely manipulate the stock price with hopeful statements while he simultaneously takes the money and runs; leaving the dupes holding the bag.