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Trump stock tanks after announcing tens of millions new shares

Trump stock tanks after announcing tens of millions new shares

New YorkCNN — 

Trump Media & Technology Group’s stock is tumbling again after the company announced a massive new influx of shares. The struggling company is rapidly losing money, and a new stock offering could help it stay afloat.

But there’s a downside to going back to the market with new shares: A new public stock offering of 21.5 million shares announced Monday would add more than 15% more stock to the publicly available shares of the Truth Social owner. That would substantially devalue existing shareholders’ stakes — including that of former President Donald Trump.

Shares of TMTG (DJT) fell more than 15% Monday. The stock had rocketed higher in recent months in anticipation of merging a blank-check acquisition company with Trump’s media business. But it has lost more than 60% of its value from its peak on March 26, the day after the merger was completed and it started trading publicly as TMTG.

Matthew Tuttle, chief executive of Tuttle Capital Management, says that management would be “stupid” not to issue new stock, even though the move will upset shareholders.

“Whenever you see a stock jump, like you saw this jump, a secondary offering is always a risk,” said Tuttle. “I think a lot of investors in this don’t know that. … You’ve got a lot of probably Trump fans sitting there saying, what the heck?”

Still, the stock’s move lower based on this latest update will likely be temporary, he said.

“This is going to piss some people off. Other people might look at it and try to buy the dip,” said Tuttle. “As long as Trump is in the news in some way, shape or form, this is going to be a meme stock. People are going to trade it.”

Shareholders, including Trump, have already seen their holdings dwindle in value since the company went public.

Anyone who bought Trump Media at the closing high of $66.22 on March 27 has now lost more than half of their money. The steep declines have put a dent in Trump’s net worth. The former president’s stake was valued at $5.2 billion at the closing high for Trump Media’s stock price. As of Monday morning, it had plummeted to about $2.3 billion. Trump’s net worth fell about $400,000 Monday from the stock’s plunge.

Why Trump Media stock is so volatile

There are a number of reasons behind the stock’s eye-popping swings. The company is tied to Trump, a polarizing political figure whose association with the stock has attracted scrutiny. Trump Media’s public debut also marked the former president’s return to Wall Street after years of regulatory and legal hurdles.

Experts have warned retail investors to be careful if they choose to trade the stock, especially because the company doesn’t have the fundamentals to back up its sky-high valuation. Trump Media lost $58 million in 2023 and made just $4.1 million in revenue.

Trump currently owns more than 57% of the company’s shares. Unless he were to purchase stock in the new public offering, Trump would own just under half of the company’s publicly traded stock after it issues more shares.

But the company needs money. It has said it has substantial doubt about its ability to continue operating. The company generates little revenue, it’s losing millions of dollars and it is losing many of its users as well.

Although the share offering was not directly related to Trump’s criminal trial beginning Monday, the company noted in a warning to potential investors that Trump’s ongoing legal proceedings pose a risk to the company’s reputation and brand.

“President Donald J. Trump is the subject of numerous legal proceedings. An adverse outcome in one or more of the ongoing legal proceedings could negatively impact TMTG,” the company noted. “If President Donald J. Trump were to cease to be able to devote substantial time to Truth Social, TMTG’s business would be adversely affected.”

This is a developing story and will be updated.

CNN’s Matt Egan contributed reporting.