Shares in Trump Media & Technology Group (DJT) fell nearly 6% in premarket trading Thursday after the US Securities and Exchange Commission (SEC) approved a regulatory filing that could lead to shareholder dilution.
The clearance, issued on Tuesday, allows investors holding the company’s derivatives, or warrants, to convert them into shares, potentially diluting the stakes of long-time investors.
CEO Devin Nunes stated that with the S-1 approval, the company plans to expand into TV streaming and pursue mergers and acquisitions.
The exercise of these warrants could inject up to $247 million into Trump Media’s balance sheet but also increase the number of shares available for trading, creating selling pressure.
Warrants fell 32% to $14 each in late trading. These instruments are commonly used in special purpose acquisition company (SPAC) deals to reward investors but dilute existing shareholders' stakes.
Former President Trump, the largest stakeholder with nearly 115 million shares valued at about $3 billion, and other insiders are currently restricted from selling until September due to a lock-up provision, which the board could potentially waive or expedite.