Donald Trump is approaching a significant financial milestone as the lock-up period restricting him from selling or leveraging his $2.3 billion stake in Trump Media & Technology Group (DJT) is scheduled to expire by September 25.
This could potentially allow the former President to access a substantial sum of money that could be used for various purposes, including funding his legal battles or his presidential campaign.
Selling a large portion of his shares presents several challenges that may have profound implications for the company’s stock price.
Trump Media’s declining share price complicates strategy
Trump Media’s stock has been under pressure, falling 4% on Wednesday to below $20, the lowest since its formation earlier this year.
The company has seen a 70% drop in value since late March, contributing to a sharp decline in Trump’s net worth.
At its peak in May, Trump’s stake was valued at $6.2 billion, but he could not cash in due to the lock-up restrictions.
The lock-up is set to lift by September 25 or earlier, provided the share price reaches $12 or more for 20 trading days within a 30-day window starting August 22.
The challenge for Trump lies in the fact that his ownership and role as the most prominent user on Truth Social, the company’s key platform, makes any significant sale likely to trigger a major selloff.
Analysts argue that liquidating even a third of his shares could significantly impact the stock price, as Trump’s actions are closely tied to investor sentiment.
This predicament is further exacerbated by other Trump Media insiders, including CEO Devin Nunes, offloading shares in recent weeks, raising concerns about the company’s stability.
Can Trump borrow against his Truth Social stake?
With the likelihood of selling shares without damaging the stock price appearing slim, Trump might explore alternative avenues, such as borrowing against his stake once the lock-up ends.
Trump may find it challenging to secure loans from traditional banks due to his contentious history with financial institutions.
Nevertheless, the possibility remains that wealthy supporters might step in, viewing it either as a strategic business opportunity or a chance to curry favor with a potential future president.
Despite a drop in share price, Trump Media is still valued at nearly $4 billion, a figure some experts describe as “grossly overvalued,” given the company reported just $837,000 in revenue last quarter. The firm’s cash reserves stand at $344 million, which it aims to use to expand its streaming services.
The fundamentals appear weak, and many market analysts believe the current valuation is not justified by the company’s financial performance.
Trump risks backlash from supporters
Selling a substantial amount of shares could also carry political risks for Trump, potentially alienating his supporters who have invested in the company.
The move could be seen as undermining confidence in Trump Media, akin to how markets would react if high-profile figures like Elon Musk or Mark Zuckerberg sold large portions of their holdings in Tesla or Meta.
Trump’s future decisions regarding his stake will be closely watched, as they could have significant financial and political ramifications.
The post Trump’s $2.3 billion Truth Social fortune: Can he access it without complications? appeared first on Invezz
