Trump Media Plummets: Shares Dive 20%, Market Cap Sinks Billions

Politics / Sunday, 14 April 2024 04:59

Amidst a tumultuous trading week, the value of Trump Media shares experienced a significant downturn, plummeting nearly 20% by the week's close. Initially, within the first hour of Friday's trading session, DJT shares stumbled by over 8%, yet managed to salvage a marginal increase by day's end, closing at $32.59, a mere 18 cents higher, representing a modest uptick of around 0.5%. Nonetheless, this closing price paled in comparison to the initial public offering (IPO) price of Trump Media shares on March 26, marking a staggering $38 decline. The company, which owns the Truth Social app, witnessed a distressing decline of 47.4% in April alone, erasing billions from its market capitalization.

Former President Donald Trump, holding nearly 60% of the company's stock, stands as its largest shareholder. However, his attention may soon be diverted, as Monday signals the commencement of jury selection for his criminal trial in Manhattan Supreme Court, concerning charges related to falsifying business records linked to a 2016 payment to adult film actress Stormy Daniels.

The inception of Trump Media's public trading followed its merger with Digital World Acquisition Corp., a strategic move designed to facilitate the transition of a private firm to a public entity. The company's fiscal performance in the preceding year revealed revenue figures of a mere $4.1 million, accompanied by a staggering net loss of $58 million. This lackluster performance, combined with the lofty valuation of the company's stock, has captured the attention of short sellers, who are wagering on the anticipated decline in share prices.

Short interest in DJT surged to $208.7 million this week, with 5.44 million shares shorted, according to Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners. With fewer than 100,000 shares of Trump Media available for short selling, traders eye a potential profit by borrowing shares, selling them with the anticipation of repurchasing at a lower price, thus capitalizing on the price differential.

As Trump Media grapples with these financial challenges, its outstanding shares stand at 136.7 million, highlighting the magnitude of the market turbulence it faces.

Just a week prior, traders seeking to short Trump Media shares faced exorbitant financing costs, soaring as high as 900% annually, as indicated by Dusaniwsky. This implied that they would require a substantial $30-per-share decline within a mere month to reach a break-even point on their trades. However, in a swift turn of events, the financing costs for shorting Trump Media shares have drastically plummeted to 200%.

Trump Media's emergence stemmed from the aftermath of Twitter's ban on former President Trump, following the tumultuous events of January 6, 2021, when a mob of his supporters stormed the U.S. Capitol. Trump, poised as the presumptive Republican presidential nominee, now frequents Truth Social, utilizing the platform to voice his opinions, particularly denouncing the four impending criminal cases against him, alongside civil lawsuits that have accrued judgments exceeding $500 million.

In a celebratory gesture, Trump hosted a lavish party at his Mar-a-Lago club in Palm Beach, Florida, commemorating the establishment of Trump Media. Addressing attendees, he extolled the significance of Truth Social, lauding its resilience and dedication. Trump also underscored the company's robust financial position, highlighting its lack of debt and boasting of over $200 million in liquid cash reserves. Notably, the company's helm is steered by former Republican congressman Devin Nunes.

— Additional reporting by CNBC’s Nick Wells

In conclusion, the turbulent trajectory of Trump Media's shares underscores the volatile landscape it navigates. While recent fluctuations in financing costs for short trades offer a glimmer of respite, the company's fate remains intertwined with its ability to weather ongoing legal challenges and sustain its digital presence amidst a polarized political climate. As Trump Media forges ahead under the leadership of Devin Nunes and the patronage of its founder, Donald Trump, the road ahead promises to be fraught with both challenges and opportunities, shaping the future of this enigmatic entity in the realm of social media and beyond.