"A Florida judge has denied a motion by <snip> Truth Social to block the sale of 18 million shares by two of the company’s co-founders, determining that the company would not suffer irreparable harm and that any potential damage could be addressed through financial compensation. The ruling came from Sarasota County Circuit Judge Hunter Carroll on Friday, who dismissed Truth Social’s arguments for a temporary injunction.
"Truth Social, officially known as Trump Media & Technology Group Corp. (TMTG), sought to prevent Arc Global Investments II LLC and United Atlantic Ventures LLC from selling their shares when a lock-up restriction expires on September 19."
"Kevin Jacobs, representing Arc Global, argued that the temporary injunction was akin to an impermissible asset freeze under Florida law. The defense also highlighted that TMTG recently issued 37 million shares to another entity for unrestricted market sale, undermining claims that the company would be significantly harmed by the sale of 18 million shares." This news is serious
Attempting to prevent others from selling reveals Trump Media's concern that the unlocking in three weeks could unleash a selling frenzy. <snip> So, can the controller now ask the board for an exemption to sell some of his locked-up shares before the September unlocking date? He is allowed to do so.
Importantly, short sellers will gain confidence from this news. Those disgruntled shareholders holding low cost or free stock may not take their time liquidating their deteriorating stockholdings.
Current shareholders: Be sure you want to hold
The new danger now is that the price will start sinking toward a fundamental-based level. Because that fundamental level is in the low single digits, the risk of hanging on looks significant.
Why the single digits? Because the fundamentals are so low:
Price per share: $19.50 Book value per share: $1.78 Cash per share: $1.77 Revenues per share: $0.03 Earnings per share: $(0.43) Quarterly revenue growth for 2nd quarter 2024 vs 2023: (30)%
To improve those fundamentals is a hefty challenge. Not only does Trump Media need to shift revenue growth to positive, but it also must do so very significantly. In addition, it needs to control expense growth to become profitable. Accomplishing those heavy tasks, if possible, will take time, and there are no current fundamental improvements to show new investors as proof of such a capability.
Therefore, something must happen to attract new investors when the unlocked selling is in full force, and that means the stock must become cheap enough to appeal to speculators. Without fundamental support, technical indicators must provide interest. The current, multi-week decline might provide short-term opportunities, but probably not until all the shares are unlocked and the unknown selling effect becomes visible
The bottom line - Short-term speculation in the face of unknown adversity is high risk
When the September 20 floodgates open, Trump Media stock selling will ramp up. How much and how price sensitive is unknown. Also, how short sellers, speculators, and shareholders (who can sell now) will behave over the next three weeks is unknown. Therefore, with high risk having unknowable results, this looks like a good time to sit on the sidelines with cash.
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