Trump Media & Technology Group Corp. saw a significant drop in its stock value during late trading after the U.S. Securities and Exchange Commission (SEC) declared a regulatory filing effective that could lead to shareholder dilution.
The social media company, largely owned by former President Donald Trump, fell about 15% to around $26, continuing a steep decline of 36% for the month.
Dilution Impact from Warrants Clearance
According to Hindustan Times the SEC's clearance allows investors holding the company’s derivatives, known as warrants, to swap them for shares, potentially diluting the stakes of long-term investors.
CEO Devin Nunes stated, "With our S-1 declared effective, we’re expecting to be well-positioned to energetically pursue TV streaming, other enhancements to the platform, and potential mergers and acquisitions."
Nunes has also been actively addressing concerns of illegal short selling by writing letters to Congress and regulators.
Warrants Drop Amid Selling Pressure
The exercised warrants could add up to $247 million to Trump Media’s balance sheet but would also introduce millions of additional shares into the market, heightening selling pressure.
Warrants dropped 32% to $14 each in late trading. While designed to reward investors, these sweeteners dilute the value of ordinary shareholders' stakes.
Trump's nearly 115 million shares, valued at nearly $3 billion on paper, are currently under a lock-up provision until September, barring any changes by the company's board.
Volatile Market for Trump Media
Since going public earlier this year, Trump Media, which owns Truth Social, has experienced significant volatility.
The stock soared to $79.38 shortly after its debut but later plummeted to a low of $22.55.
The recent developments with the SEC filing have further impacted its market performance, reflecting ongoing investor concerns.
