After the SEC announced that regulatory documents that could dilute shareholder equity were effective, the Trump Media & Technology Group fell in after-hours trading.
It was learned that after the Securities and Exchange Commission (SEC) announced a regulatory document that may dilute shareholder equity, the social media company mainly owned by former US President Donald Trump, the Trump media technology group, fell by as much as 15% in after-hours trading to around $26. The company fell almost 10% on Tuesday and fell 36% this month. This permission allows investors to exchange their company derivatives (i.e. stock warrants) for the company's stocks, which may dilute the long-term investors' holdings.
In response to this, Devin Nunes, CEO of Trump Media & Technology Group, said, "With the effective announcement of our S-1, we expect to be in a favorable position to actively pursue other enhanced features of the TV streaming platform and potential mergers and acquisitions." Nunes has recently written to Congress and other regulatory agencies to investigate allegations of illegal short selling.
A document on Tuesday showed that the exercise of these stock warrants could increase the balance sheet of Trump Media & Technology Group by $247 million and also increase the pool of tradable stocks by millions of shares. Historically, some investors who exercised their stock warrants have sold the converted stocks, thereby creating selling pressure.
These stock warrants fell 32% in the final trading session to $14 per share, the lowest level since early May. They are also known as "sweeteners" and are a common component of special purpose acquisition company transactions designed to reward investors and dilute the value of common shareholders' holdings by issuing millions of additional shares of stock.
The former president is the largest shareholder of the Trump Media & Technology Group, owning nearly 115 million shares of stocks with a book value of nearly $3 billion. However, due to the lock-up provision, he and other insiders are not allowed to sell stocks before September. This restriction may be raised if the board of directors of the company gives up or advances the expiration date of the provision. The Trump Media & Technology Group, which owns Truth Social, has been turbulent since its listing earlier this year. The stock price soared to $79.38 in the days after its listing, but fell to $22.55 weeks later.