Water flowing over floodgates of a dam at Khun Dan Prakan Chon, Nakhon Nayok Province, Thailand
On April 15, Trump Media filed the SEC Form S-1 in order to register all of the newly merged company’s shares for sale. That started the clock ticking for the SEC approval followed by a potentially large selloff.
Here are the flood waters rising (from page 14):
(Bold format is mine)
“Shares of Common Stock outstanding assuming exercise of all Warrants and the issuance of the Earnout Shares and Alternative Financing Shares:
"204,441,834 shares of Common Stock (based on total shares outstanding as of April 1, 2024), consisting of:
- 136,700,583 shares of Common Stock outstanding (excluding shares of Common Stock being held in escrow pending a resolution of a dispute with certain stockholders that may result in the release of up to 4,667,033 shares of Common Stock)
- 40,000,000 Earnout Shares
- 6,250,000 Alternative Financing Shares
- 21,491,251 shares of Common Stock offered by us"
And here are the floodgates opening:
"Terms of the Offering:
"The Selling Securityholders will determine when and how they will dispose of the shares of Common Stock registered for resale under this prospectus"
What about the 6-month waiting period?
It applies to some shares, but many shareholders will be free to sell. Moreover, Donald Trump can ask the board to grant him a release from that requirement for his majority holding of 114,750,000 shares.
The main point is that the ratio of buyers to sellers could tilt easily to the latter.
But with the stock going up...
In the stock market, yesterday's action is past. Certainly, do not draw a trendline based on the stock’s 8-day rise. Many shareholders acquired their shares at low prices. Having waited through the ups and downs, they might prefer to realize their profits and move on.
Then there is the classic psychological trend reversal effect. With DJT hitting $70 a month ago, and now about $40, up from the low $20s, any weakening could encourage worry-based selling. (Especially, if last week's rise through the $35 barrier does not hold.)
The daily movement
Weekly graph for entire period
The bottom line - Do not wait
Investing successfully means running for cover when the floodgates open. Waiting to see if floodwaters really are coming means getting swept downstream.
Wall Street is filled with successful investors who "sold too soon." After all, you can always buy back if the waters recede. Or, more likely, you just go another direction where the sun is shining on dry land.
