Where to next for Trump Media’s share price?
Where to next for Trump Media’s share price as it trades below its post-merger low?
On the first day of the Democratic National Convention (DNC) the republican former President’s Trump Media & Technology Group (formerly named Digital World Acquisition Corporation) shares hit a post-merger low at $22.24.
The parent company’s shares of former President and third-time republican party presidential nominee Donald Trump’s Truth Social platform have been in free fall for months.
The Trump Media shares have so far fallen by around 70% from their late March post-Digital World Acquisition Corporation merger $79.38 high. They are now trading at their pre-merger January levels with the psychological $20.00 mark representing their next technical downside target.
What is behind the Trump Media shares price rout?
Trump Media shares saw a frenzied 80% rise when they first started trading on the NASDAQ 100 after completing a merger deal but have been sliding ever since, bar a 30% share price spike immediately following Trump’s assassination attempt at his 13 July campaign rally. Since then, the shares have fallen by around 45% in just over a month.
One of the reasons for the share price slump had to do with Trump Media's second quarter (Q2) earnings report which disappointed investors. Without an earnings call or information from management about plans to improve Truth Social, shareholders lacked insights into how performance could improve going forward with some shareholders heading for the exit.
Since Donald Trump owns over 50% of Trump Media's shares, giving him controlling rights that risk excluding minority shareholders, he holds much sway over the company’s board.
Aside from Trump's large stake, other shareholders hold locked-up shares from various sources - services rendered, loan repayments, or low/no cost allocations tied to the SPAC merger. Lacking a strong reason to hold, once saleable, share liquidations may occur if weakness persists, especially since many did not originally invest in Trump Media.
There is also the risk of early insider selling. Despite having locked-up shares, Trump could be exempted by the board to sell early while still maintaining majority control. This would allow him to monetize holdings before expected saleable shares selling occurs in September, especially if he were to need additional funds for his presidential campaign.
The fact that the Truth Social brand is very closely linked to former President Trump and that he has endorsed his competitor Elon Musk, the owner of X (formerly Twitter), by calling him ‘brilliant’ and offering him a top job were he to be elected president, also puts further potential pressure on Trump Media’s share price.
Technical analysis of the Trump Media share price
The fact that Trump Media shares have fallen below their post-merger April low at $22.55 is technically significant as it increases the odds of this support level having been breached with the psychological $20.00 mark representing the next downside target.
Another potential downside target is made up of the November 2023 high at $19.50.
In case of a bounce being seen, the June low at $24.83 is likely to act as resistance and only a bullish reversal above the 12 August high at $27.18 on a weekly chart closing basis would void the medium-term bearish Trump Media share price outlook.
Trump Media daily chart
In summary, factors like poor earnings, uncertainty about strategic direction, controlling rights concentrating power with Donald Trump, and incentives for early insider sales could continue to pressure Trump Media's share price and introduce further risks for minority investors.
This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
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