UPDATE:
I am so sorry about this. Forbes had an account of what precipitated the drop today in DJT shares and the two paragraphs I used appear to have a serious error. This was pointed out by two Kossacks, and I see the basic error but am even more uncertain about the consequences for Donny’s attempts to sell any of his shares early. I am just going to repeat MDlibesq’s comment here for now:
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The Forbes article provides that “The Monday selloff came after Trump Media filed to issue as many as 146 million new common shares in the company and another 21 million in warrants (the rights to purchase shares at a certain price)….”
Somebody at Forbes should actually read the S-1 because the filing provides
“This prospectus relates to the issuance by us of up to an aggregate of 21,491,251 shares of our common stock, $0.0001 par value per share...[and] This prospectus also relates to the offer and sale from time to time by the selling securityholders named in this prospectus or their permitted transferees (the “Selling Securityholders”) of (a) up to an aggregate of 146,108,680 shares of Common Stock… [and] up to 4,061,251 Warrants consisting of (i) 566,742 Placement Warrants, (ii) up to 369,509 Convertible Note Post IPO Warrants, and (iii) up to 3,125,000 Alternative Financing Notes Post IPO Warrants. We will not receive any proceeds from the sale of shares of Common Stock or Warrants by the Selling Securityholders pursuant to this prospectus.”
They weren’t even close in their article (pish posh on the financial press). Dilution of 21 million shares and dumpage by trumpage (and his minions) of 146 million shares and 4 million warrants (i.e., the resale by private holders of existing shares, not the new issuance of shares by the company).
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original diary:
As J Ash Bowie mentioned, Trump Media is down again — so far today very hard, and for specific reasons.
Let’s review:
Donny currently holds 78.75 million of the 137 million shares outstanding of DJT, and that gives him 57.5% ownership of the so called “company” with the ticker DJT. But as many Kossacks know he may receive up to 36 million more shares if the terms of his “earnout” are met:
He is still in line to receive an additional 36 million earnout shares in the company. The incentive requires its volume-weighted average price to remain above a series of levels. The stock must stay above the $17.50 level in 20 out of any 30 trading days following its merger on March 25 during a three-year period to receive the maximum award.
Barrons
The stock price must stay above $17.50 for Donny to receive the entire earnout “award”, but there are also tiers at $15.00 and $12.50 as well. (Today is the 15th day of above $17.50 in price.)
What happened today:
People holding shares in DJT see that when the total company value stays the same, but the number of shares in the company suddenly increase, their slices of the pie will be much smaller: share dilution. Unless one happens to be one of the insiders grifters who collaborated with this IPO scheme grift, this is not a good thing starts to be more apparent as a scam from start to finish.
The bad/good news is that Donny will hold more shares but the share value drops.
Forbes summarizes it. DJT is filing for but not necessarily issuing an increase in shares that could eventually more than double the shares outstanding:
The Monday selloff came after Trump Media filed to issue as many as 146 million new common shares in the company and another 21 million in warrants (the rights to purchase shares at a certain price), and it would severely dilute existing shareholders’ stakes considering the company currently has only 137 million shares outstanding, about 79 million of which belong to Trump.
Though it’s a routine move for a company who went public via reverse merger like Trump Media, and does not guarantee Trump Media will in fact follow through with an offering of that size, the filing opens the door for Trump and other insiders to more easily cash out on their shares, Bloomberg noted.
I would think a number of short sellers would buy back their borrowed shares at this point, and the price might find a new range for a day or two. This drop is partly a bet on how much the stock will be diluted. But who knows? IPOs are notoriously volatile and price pop ups like DJT had in the first days is not unusual, nor is the aftermath. But the details are well outside my lane.
As compared with an IPO, the price set on March 22 ($36.94) after the merger agreement becomes a baseline. DJT is now well under that. At 11:37 am EDT ($27.77/share) Donny’s paper value is $2.2 billion, and a long drop after the intraday peak on the 27th (@ $71.93) $5.7 billion. Once traders have less room to maneuver and more so called investors recognize that DJT is not a company so much as a plaything for grifters and the self deluded, it will drop more. “When” is the question.
THANK YOU for the math corrections!