On Tuesday, Trump Media, the company where former President Donald Trump holds the majority stake, saw its share price plummet to its lowest point since going public in March. The stock, trading under the ticker DJT, dropped to $17.89 per share by midday, surpassing its previous low of $19.38 set on August 28. This dramatic decline represents a staggering 77% decrease from its peak of $79.38 per share recorded on March 26, following its merger with a special purpose acquisition company (SPAC). By the end of Wednesday’s trading, DJT shares had slightly recovered to $18.08, still down over 7% from the previous day.
Market Trends and Their Impact
The steep decline in Trump Media’s stock came amid a broader market slump, especially impacting tech stocks. On Tuesday, the Nasdaq Composite fell by 3.26%, the Dow Jones dropped 1.51%, and the S&P 500 saw a decrease of 2.12%. While these market trends certainly contributed to the stock’s dip, they do not fully explain the extent of Trump Media’s decline.
Trump Media’s stock has displayed behavior more akin to “meme stocks” than traditional investments. These stocks often experience extreme fluctuations driven by social media buzz and investor sentiment rather than standard financial metrics. The performance of Trump Media’s shares is closely tied to Donald Trump’s political fortunes, rising and falling with his public and political activities.
For example, in July, the stock surged following an assassination attempt on Trump, coinciding with a boost in voter support for his 2024 presidential bid and several high-profile endorsements. This volatility underscores how sensitive the stock is to Trump’s political standing.
Impending Lockup Expiry and Speculation
The current drop in Trump Media’s share price is particularly significant as it approaches a crucial deadline for major shareholders, including Trump. An existing “lockup agreement” restricts these shareholders from selling their shares until September 25. However, this deadline could be moved up to September 20 if the stock stays above $12 per share for 20 consecutive trading days within the 30-day period starting last Friday.
Trump has not announced any plans to sell his shares, but speculation abounds that his campaign expenses and legal troubles might influence his decision. If Trump decides to sell, it could spark a broader selloff, further undermining investor confidence. As of Tuesday, Trump’s nearly 59% stake in the company was valued at over $2 billion, though this value is at risk due to the declining stock price.
Legal Issues and Stock Manipulation Claims
The stock has faced mounting pressure from legal issues related to Trump. In June, shares fell by nearly 40% following Trump’s conviction on charges of falsifying business documents to cover up an alleged affair. Trump denies these allegations and is set to be sentenced on September 18. In response, Trump Media has blamed short sellers and market manipulators for the stock’s decline and has urged regulators to investigate and pursue legal action if any illegal trading practices are found.
Changes to Social Media Strategy Concern Investors
Adding to the company’s difficulties, Trump Media revised its registration statement in June, allowing Trump to use other social media platforms in addition to Truth Social. This change followed Trump gaining millions of followers on TikTok, raising concerns about potential impacts on Truth Social’s user base and growth. The amendment has fueled worries that Trump might expand his social media presence, potentially affecting investor confidence in the company’s future.
