Trump Media, the parent company of Truth Social, experienced a sharp decline in its stock price following the Securities and Exchange Commission’s (SEC) approval of additional share issuance. On Tuesday, after-hours trading saw Trump Media’s stock plummet by over 17%, exacerbated by a nearly 10% drop earlier in the regular trading session.
The SEC’s decision allowed early investors in Trump Media to exercise their public warrants, potentially flooding the market with up to 14,375,000 new shares. This move was part of a broader strategy outlined in the company’s prospectus, which warned of a possible significant decrease in stock price due to increased supply from warrant holders looking to sell.
Despite the anticipated market reaction, Trump Media emphasized that current shareholders who may sell at lower prices could still realize positive returns based on their initial purchase prices.
Trump Media’s Stock Tumbles After SEC Approves Additional Share Issuance for Truth Social
Moreover, the company highlighted the financial benefits of the SEC’s approval, estimating potential proceeds of around $247 million if all warrants are exercised for cash, in addition to $40 million in previously restricted cash becoming unrestricted.
CEO Devin Nunes expressed optimism about the future prospects of Truth Social and Trump Media, noting that the effective registration statement would facilitate their plans for TV streaming and platform enhancements. Nunes also hinted at potential mergers and acquisitions, buoyed by support from approximately 620,000 retail shareholders.
While Trump Media faced a significant immediate stock price decline due to the SEC’s regulatory action, the company remained focused on leveraging the newfound financial flexibility to expand its operations and pursue strategic growth initiatives in the media and technology sectors.
