Implications of Trump’s upcoming ability to sell shares in Truth Social’s parent company

Former President Donald Trump’s ownership in Trump Media & Technology Group confirms his billionaire status. The company, which operates the Truth Social platform, is valued at over $3.5 billion, with Trump holding more than half of the shares. However, a lock-up agreement has so far prevented Trump and other insiders from selling any shares since TMTG went public in March.

The expiration of Trump’s lock-up deal is approaching, allowing him to potentially sell his shares, although he has indicated he has no plans to do so, as it may negatively impact other shareholders. Trump does not actively manage TMTG; the CEO is former Republican U.S. Representative Devin Nunes. Truth Social was launched in February 2022 after Trump’s removal from major social media platforms following the Jan. 6 Capitol riot.

Despite being pitched as an alternative to mainstream social media platforms, Truth Social has largely attracted a conservative audience without significant growth beyond political commentary. The platform has faced criticism for hosting hate speech due to its lenient content moderation policies. TMTG’s revenue is primarily derived from advertising, generating minimal income, and incurring losses in recent quarters.

The company also invests in technology services, including a new TV streaming service called Truth+. TMTG’s stock performance has been erratic, closely linked to market speculations about Trump’s re-election prospects rather than the company’s financial outlook. Trump’s potential decision to sell his shares could impact the stock price further, despite his statement that he intends to retain his stake. Investors holding more than 10% of a company are required to disclose any stock sales to the U.S. Securities and Exchange Commission promptly.

Experts suggest that TMTG’s stock is overvalued compared to its revenue, potentially leading to a substantial decline in its price. This scenario may prompt other major shareholders, like CEO Nunes, to consider selling their shares rapidly. It is uncommon for founders or significant holders to unload a substantial portion of their shares immediately after a lock-up period expires, highlighting the unusual circumstances surrounding TMTG’s stock post-lock-up period.