Trump Media Stock Drops 15% Amid Share Sale Concerns

The Trump Media & Technology Group (DJT) faced significant pressure on Wednesday following the release of a filing with the U.S. Securities and Exchange Commission (SEC) on Tuesday evening. The filing, an S-3 form for a simplified securities offering, disclosed that shareholders, including the Trump Trust, might occasionally sell large quantities of stock. This revelation sparked concerns among investors about potential large-scale sell-offs by Trump, leading to a drop in DJT's stock price.

The company disclosed in the filing that it might sell up to 8.37 million shares related to warrants issued during the initial public offering (IPO). Additionally, the filing included a list of major shareholders and insiders who might also occasionally sell up to 134 million shares. This list included over 114 million shares held by the Trump Revocable Trust. It was also noted that the U.S. Attorney General, Pam Bondi, was on the list, having registered 106,000 shares in DJT. Bondi had previously committed to divesting these shares within 90 days of taking office, which would be around early May.

Market attention was primarily focused on Trump, who, as a major shareholder in Trump Media, controls 53% of the company's shares. Despite a significant drop in stock price this year, these shares are still valued at nearly $20 billion. Following his victory in the presidential election last year, Trump transferred these shares to the Donald J. Trump Revocable Trust, managed by his son, and has repeatedly stated that he has no intention of selling them.

In response to widespread media reports suggesting that Trump might be looking to cash out, DJT issued a statement on Wednesday. The company clarified that the filing was a routine update to re-register shares that had already been registered under an S-1 form in June of last year. The company emphasized that there is currently no open window for related parties to sell shares, and that the filing was merely to keep the company's documents up to date.

Financial experts noted that such filings are intended to inform investors about the potential for large-scale share sales, but they do not necessarily mean that sales will occur. Jay Ritt, a finance professor at the University of Florida, explained that if insiders attempt to sell shares, such filings are mandatory. Seth Golz, an analyst at Morningstar, also pointed out that while the filing indicates the possibility of the Trump Trust selling shares, it does not guarantee that they will do so. This uncertainty adds to the market's speculation about whether and when such sales might occur.

The company also warned in its disclosure that the number of shares registered for potential sale under the S-3 form is 1.29 times the current number of outstanding shares. If a large-scale sell-off were to occur, it could potentially lead to a significant drop in the stock price. However, the core business of DJT is relatively small compared to its market capitalization. The company reported sales of less than $4 million last year, with a net loss of $401 million. Earlier this year, DJT announced plans to enter the financial services sector within the year.