The market is closely watching any move by Donald Trump and other big investors today as a lockup period that until now has barred any insiders from selling shares expired. The question is: Will they sell?
For his part, Trump says he won’t sell down his stake now. Shares in the company, which is majority-owned by the Republican presidential candidate, were down 7.8% to $13.55 on Friday.
By Thursday’s close, the stock was down over 78% from its all-time closing high of $66.22 on March 27, the day after it began trading, according to Dow Jones Market Data.
Trump Media, which trades under the ticker DJT, tends to trade less on traditional valuation metrics and fundamentals such as earnings and more as a proxy for Trump’s perceived chances of winning the presidential election on Nov. 5.
The social-media company operates platform Truth Social, a rival to X, formerly known as Twitter. Trump Media reported revenue of $837,000 and a net loss of $16.4 million for the quarter ending June 30.
The stock has fallen steadily since July, when President Joe Biden withdrew his candidacy and endorsed Vice President Kamala Harris to take his place. While Biden lagged behind Trump, polls have suggested Harris and Trump are neck-and-neck in the race for the White House. Concerns that Trump might soon sell his roughly 57% stake in the company have also weighed on shares.
The lockup agreement was put in place after a merger with the blank-check firm Digital World Acquisition Corp. in March this year took Trump Media public. It’s a common occurrence for special-purpose acquisition companies.
The expiration of the lockup affects not only the ex-president but other inside investors as well. ARC Global Investments, United Atlantic Ventures, Phillip Allen Juhan, and Eric S. Swider, are listed as insiders on FactSet. Combined, they own 66% of shares outstanding, according to FactSet.
ARC is a fund run by Patrick Orlando, the former CEO of DWAC. A Delaware judge on Tuesday ruled Trump Media breached an agreement with Orlando’s ARC and must grant it a bigger share of its stock.
Swider is a member of Trump Media’s board of directors and has also served as DWAC CEO. Juhan is the CFO of Trump Media.
Any sign that Trump might be ready to cash in could set off a selloff because he isn’t only the biggest shareholder, but is also seen as the heart and the soul of the company.
If Trump changes his mind and decides to sell anyway, he could face legal problem with the Securities and Exchange Commission, according to experts.
“SEC [rules] prohibit anyone from making an untrue statement of material fact, or engaging in an act that would operate as a fraud or deceit, in connection with the purchase or sale of a security,” Chris Manderson, chair of the corporate department at Ervin Cohen & Jessup LLP, told MarketWatch.
“So if a large a shareholder publicly states they will not sell, and then quickly thereafter does sell, it could trigger trouble both from the SEC and other stockholders, especially if the purpose of the statement was to boost the stock price,” Manderson added.
It isn’t clear for how long Trump would have to wait to sell to avoid legal issues of that sort.
Even if Trump keeps his shares, a sale by other big holders like ARC or United would likely drive Trump Media to yet another record low.