Trump Media (DJT) Stocks – Time to Sell

Once again, Trump Media had to correct a major mistake. And once again, shareholders were given an unsatisfactory explanation. Add to that the high risk of selling 4 weeks out, and it was time to sell.

The last costly mistake

From the SEC Form 8-K filed on Friday (August 23):

“Effective August 22, 2024, the Board and audit committee of Trump Media & Technology Group Corp. (the “Company” or “TMTG”) have authorized the repurchase of shares of an aggregate of 128,138 shares of the Company’s common stock from certain executive employees at the prevailing market price of $22.70 per share. In consideration for the repurchase, the Company will pay $2,908,708, plus applicable penalties and interest, to the U.S. Internal Revenue Service and certain state taxing authorities in connection with the March 7, 2024 issuance of TMTG executive notes.”

Okay, let’s identify the gaps and, if possible, determine what happened…

• What is that big $2.9 million IRS payment for? Taxes? A fine?
• And how much do those undisclosed “applicable penalties and interest” add to the bill? The penalties can be steep, so shareholders should be aware.
• What led to the IRS payments? “In connection with the issuance on March 7, 2024 of TMTG executive notes” is an incomplete reason. What went wrong? We know that Donald Trump wanted to reward the executives with notes, not cash, to be converted into stock upon completion of the merger. That’s what happened.
• Who recommended to the Board AND audit committee that they authorize a share buyback? And why did the shares have to be bought back?
• Why were “certain executives” singled out? Stock buybacks are typically conducted on the open market to obtain the lowest price.
• All directors’ shares are subject to a lock-up that ends in September, so how did they become transferable?
• The table below lists the five Trump Media executives and their share buybacks. It should be noted that 18.6% of their total shares as a group were bought back. It should also be noted that CEO Devin Nunes and General Counsel Glabe Scott had larger proportions of their shares bought back without explanation – a penalty?

• The company’s payment to the IRS of $2.9 million is the same as the value of the shares repurchased at $22.70. The company therefore paid the IRS $2.9 million AND $2.9 million to selling directors? Probably not. There is the misleading phrase “as consideration for the buyout.” Does that mean the board and audit committee (and presumably controlling shareholder Donald Trump) decided the directors should pay the buyout proceeds back to Trump Media to cover the IRS payment?

All questions must be answered so that shareholders (owners) know what is happening with their investment.

After that there are only lawsuits…

The SEC filing lists an update on the lawsuits. It’s important to note that most of the Trump Media lawsuits are against the Trump Media founders, the founders of the Digital World Acquisition SPAC that merged with Trump Media, Digital World’s financial backer, and a key service provider. In other words, Trump Media now has a falling out with people and organizations that helped provide Trump Media with key funds and a way to become a public company. And those shareholders are part of a large, closed group.

And that leads to the key reason to sell now

The four-week countdown to a massive freeze of DJT stock has begun. While Donald Trump owns many of those currently locked-up shares, a significant portion of the rest are held by parties who chose not to invest in Trump Media. There are lenders who were paid in stock, service providers paid in stock, and others who acquired free or cheap Digital World stock. And some shareholders are facing lawsuits.

As such, there’s a good chance that many locked-in shareholders are eagerly awaiting the opportunity to finally cash out, especially given the stock’s poor performance. And that reality means shareholders who can sell now should consider doing so. They have a unique advantage that will disappear overnight in four weeks.

But will the sale hurt Donald Trump?

No. It took care of itself. Plus, any price decline caused by shareholders selling now will likely be small compared to what will happen in four weeks. In fact, the combination of a weak second-quarter earnings report and the impending unlock will keep most potential investors on the sidelines. That means expect high volatility for the next four weeks as day traders try to outsmart each other.

Consider this strategy…

Sell ​​now to create a cash reserve. Then watch what happens when millions of shares of DJT become tradable. Whether the selling effect is small, large or large, the price will likely fall. If it reaches $17.50 (the initial January level), there may be additional selling as all the excitement and anticipation before and after the merger is washed away.

And that’s not all that’s going to happen. Two major events could affect the stock:

• First, the presidential election on November 5. Will Trump win or lose?
• Second, Trump Media’s Q3 earnings report will be released in mid-November. Will it show a positive turnaround for the stock, or confirm another large loss and negative growth?

At that point, you can decide if you want to come back. As for Trump, he’ll do what works for him (which could be selling his unlocked stock to raise money for a new venture).

Summary – Successful investing comes from timely actions

Waiting for the dust to settle or the price to rebound is a common cause of investment losses. It’s better to act when the time is right. And remember – when you’re holding cash, you can relax and choose when to jump back in – or not.