It’s a truism to say that the stock market is a lot like gambling, it’s another way of playing the odds. In the case of DJT, the stock associated with Trump Media & Technology Group, it has become a way of betting on Donald Trump’s chances of winning the November election. In the wake of Kamala Harris’ surge in the polls, DJT has sunk to a new low since it went public in March, closing at $20.99 on Tuesday. In the last 30 trading days, it has lost more than 40% of its value. This suggests that investors may be feeling less bullish about the prospects of Trump Media & Technology Group in the context of shifting political dynamics.
The close ties of the stock to the fortunes of the erratic candidate were made clear in regulatory filings, as Trump Media underlined how critical Trump is to the company’s brand, warning that its value “may diminish” if Trump’s popularity wanes. Indeed, many of the small shareholders have bought in simply as a gesture of support and solidarity for their candidate. MAGA supporters consider it a badge of honor to own some shares of DJT.
Now another factor is weighing on DJT stocks. In another month Trump can cash out his paper worth, what will he do?
Trump owns about 60% of the company’s outstanding stock. He is expected to be able to start selling shares as soon as Sept. 20 when a six-month lockup period that has prevented insiders from unloading their holdings is expected to lift.
It is widely known that Trump has astronomically high legal bills due to his many ongoing and past legal proceedings. Cashing out could help him pay his mounting bills but could at the same time, antagonize supporters who have propped the stock as a vote of confidence in Trump and his chances of winning a second term in the White House. Selling shares in DJT could be viewed as a vote of no confidence in the company and in Donald J. Trump.
Jack Smith, the prosecutor in Trump’s federal election interference case, secured a new indictment against Trump on Tuesday; this adds another layer of uncertainty and risk to the stock.
The company’s financial health is also under scrutiny, as it has been reported to have heavy losses with almost no revenue. This financial situation raises concerns about the company’s long-term viability and profitability, further influencing the stock’s performance.
Trump Media reached a deal in July with Yorkville Advisors to register and sell up to $2.5 billion worth of new shares, says University of Florida finance professor Jay Ritter. This could be seen as throwing DJT a lifeline. However, while “This increase would reduce the downside potential for the stock…Any upside for the company is dependent on coming up with a business strategy to generate revenue and profits,” Ritter said. “So far, the company has failed to find a successful strategy.”
Moreover, large fund management companies like BlackRock, State Street, Charles Schwab, and Vanguard have reportedly bought shares of Trump Media & Technology Group in the second quarter. Despite this investment, the stock has continued to decline, which could indicate a lack of confidence in the company’s future growth and strategy.
The fluctuations of DJT stock underscore the inextricable ties between politics and the stock market. In this case, as the fortunes of Donald Trump rise and fall, so does the value of DJT stocks.
