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Trump Media & Technology (NASDAQ:DJT) is continuing to rally, soaring 11.5% before the bell on Wednesday, although the firm’s near $8B valuation seems excessive as it has never turned a profit. The risk of its biggest shareholder, former U.S. president Donald Trump, cashing in on the gains also looms large.
DJT surged as much as 59% in its volatile market debut on Tuesday, before paring gains to end 16% higher. “There are political motivations driving DJT,” Steve Sosnick, chief strategist, Interactive Brokers. “I’ve always believed its most devoted investors viewed it as a call option on the MAGA movement.”
Trump owns ~78.8M DJT shares, meaning his nearly 60% stake was worth around $5B. However, these are just paper gains, as Trump can’t sell these shares given a six-month lock-up period.
Recall that Trump is facing a cash crunch as he battles criminal indictments and civil charges. In a small relief, Trump won an appeal to hold off on the collection of $454M related to his civil fraud judgment, if he puts up $175M within 10 days.
Now, to turn his DJT shares into cash, Trump would need approval from the board and underwriters for a waiver of the lock-up period. The board includes his son Donald Trump, Jr. and former officials from his administration.
But if such a waiver is approved and Trump sells a significant portion of his shares, Trump Media’s (DJT) stock would tank.
Trump may also seek to use his DJT stake as collateral to get a loan, although chances of securing funds this way are likely low.
Investing Group Leader Jonathan Weber warned that the gains in Trump Media (DJT), which owns Truth Social, would be speculation-driven until the social media platform can show resilient user growth and improving financials.
