The day that Donald Trump is due to withdraw cash from Truth Social’s parent company is fast approaching, raising concerns of selling pressure that could deal a major blow to meme stocks.
On paper, Trump’s shares in Trump Media and Technology Group (TMTG) are valued at $1.95 billion, which could help cover his mounting legal fines.
However, when he agreed to a reverse merger with Digital World Acquisition Company (DWAC) on March 25, he accepted a six-month lock-in period, preventing him from selling any of his 115 million shares.
Trump owns 59% of TMTG and unless he sells it off in small amounts, the stock price could plummet.
Investors are growing nervous as the lockup period expires in three weeks.
Trump’s financial situation appears to be grim: He’s been selling Trump-themed sneakers and a Bible with “God Bless the USA” written on it, and is now offering some of the suits he wore to the first debate with Joe Biden to collectors who will buy $1,500 worth of digital Trump trading cards.
TMTG shares fell 6% on Wednesday to close just below $17, wiping out all of their gains this year while the S&P 500 is up 16% in the same period.
Officials with TMTG did not respond to a request for statement, while Trump did not respond to Fortune’s requests for comment about Truth Social and X.
Loss-making TMTG is still worth 1,000 times its sales
TMTG has now lost 80% of its value since hitting an all-time high of $79.38 on March 26, its first day of trading under the ticker DJT, when Trump’s personal holdings were worth nearly $9.11 billion.
The stock price could continue to fall. Last week, CEO Devin Nunes and CFO Philip Jehan sold $2.5 million worth of stock, further dampening investor sentiment.
Despite a market capitalization of $3.4 billion, the loss-making social media company trades at more than 1,000 times its annual sales, and with sales of just $1.6 million in the first half of this year, it is in a deep cash flow deficit.
Wall Street analysts have steered clear of TMTG because it has attracted little interest from professional investors as a “meme stock,” and even when analysts were willing to cover the company, TMTG doesn’t release key metrics, such as the number of active, monetizable users.
The stock has been viewed primarily as a bet on Trump’s reelection, but that bet is now looking uncertain as polling margins in key battleground states narrow and Kamala Harris gains momentum.
The outcome of the November election will be key for TMTG’s stock price
Trump was forced to return to Twitter (now X), which has 10 times the followers and a much larger audience, to reach potential voters.
If users can access his content on other competitors’ platforms, the value Truth Social has to users is further diluted.
But if he loses in November, Trump’s political career will likely be over, making Truth Social’s future relevance significantly reduced.
John Reckenthaler, vice president of research at financial services firm Morningstar, told Quartz that buying TMTG shares is tantamount to buying into Trump’s personal brand.
“But if he loses two presidential elections in a row, he’ll have no brand,” he said last week.
One scenario is that Trump will sell his TMTG shares about five days earlier, around September 20th, unless the stock price falls below $12.
In any case, a sale would undoubtedly raise legal questions because Don Jr., as a director, has access to material nonpublic information, including the company’s third-quarter results.
The only way this overvalued stock issue could end well for TMTG investors is if Trump finds a strategic investor willing to buy the entirety of his company.
The new special issue features a Wall Street legend getting a dramatic makeover, tales of cryptocurrency shenanigans and badly behaved poultry royalty.
Read the story.
