shares of Trump Media & Technology Group (NASDAQ: DJT) Shares fell 18.4% on Monday after the Donald Trump-owned social media company announced plans to let existing investors exercise their stock acquisition rights much earlier than the previously agreed upon schedule. .
Trump Media Wants to Allow Insider Selling many earlier than expected
In an SEC filing Monday morning, Trump Media & Technology Group announced that the potential future sale of millions of shares currently restricted under the terms of stock options held by investors announced plans to recognize the stock as convertible into common stock. Trump Media & Technology Group also plans to allow company insiders to sell their stakes sooner than expected. Noting that the filing includes all stock held by the former president, his approximately 57% ownership in the company includes restrictions on President Trump from selling any stock for approximately five additional months. There is a lock-up period remaining. Trump’s social media network, Truth Social, is the company’s main asset.
Trump Media & Technology Group, by the way, just became a public company late last month, and completed a SPAC merger with so-called blank check company Digital World Acquisition Corporation on March 25th.
What’s next for Trump Media & Technology Group investors?
Lock-up periods and warrant restrictions are generally put in place to prevent insiders from cashing out their shares en masse and to protect new investors in companies that have just gone public. However, under the latest amendment, Trump Media & Technology Group would be open to the sale of approximately 21.5 million shares by these insiders, effectively diluting existing shareholders by more than 15%.
So today’s 18%+ decline is only proportional to the number of new stocks that may soon flood the market. Given that such severe dilution is expected so early in the company’s public history, it’s hard to blame some investors for taking their money off the table in response today.
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Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a disclosure policy.
Why Trump Media & Technology Group’s stock price plummeted today was originally published by The Motley Fool
