Trump Media & Technology Group’s stock is tumbling again after the company announced a massive new influx of shares. The struggling company is rapidly losing money, and a new stock offering could help it stay afloat.
But there’s a downside to going back to the market with new shares: A new public stock offering of 21.5 million shares announced Monday would add more than 15% more stock to the publicly available shares of the Truth Social owner. That would substantially devalue existing shareholders’ stakes — including that of former President Donald Trump.
Shares of TMTG (DJT) fell more than 15% Monday. The stock had rocketed higher in recent months in anticipation of merging a blank-check acquisition company with Trump’s media business. But it has lost more than 60% of its value from its peak on March 26, the day after the merger was completed and it started trading publicly as TMTG.
Wouldn’t people still own the same percentage, but the company itself just own less?
I don’t believe they can just create shares out of thin air. The company would typically own a certain amount of shares the entire time and then sell the ones they own.
So if you had 1% before and the company owned 50%, they might decide to sell half of their shares so they now only own 25% but you still own your 1%. You don’t just magically have 0.5% now.
The reason the shares drop in price when this happens is because it’s a sign that the company is either in financial trouble and seeking for a quick influx of cash or it’s a sign that the company doesn’t have much hope for its future success and wants to sell now before the price naturally starts to go down anyways.