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Truth Social stock in freefall as Donald Trump is found guilty

Truth Social stock in freefall as Donald Trump is found guilty
Elmaz Sabovic

The guilty verdict has been reached in a long-awaited Hush Money trial, where former U.S. President Donald Trump has been found guilty on all 34 felony counts by a unanimous decision from 12 jurors in New York.

With the sentencing scheduled for July 11, Trump is facing possible legal repercussions that could impact his 2024 presidential campaign, but that is not the only consequence of the trial.

His recently IPO’d social media, The Truth Social, listed as Trump Media & Technology Group Corp (NASDAQ: DJT) on the stock market, has immediately felt the effect of the verdict, as DJT stock slumped over 9% in the pre-market, taking its closing price of $51.84 down to $47.09 at the time of writing.

DJT stock 24-hour price chart. Source: Google Finance
DJT stock 24-hour price chart. Source: Google Finance \

Meme stock status and controversy surrounding DJT shares

Since the initial public offering (IPO) on March 26, where DJT shares were initially priced over $70, the stock has experienced significant volatility with substantial daily fluctuations in gains and losses. This volatility, combined with high shorting activity by traders, has led to speculation about DJT being classified as a ‘meme stock.’

In a never-ending drama surrounding the former president, just over a month ago, on April 19, Trump Media contacted Nasdaq about market manipulation concerns due to ‘naked’ short selling of its stock.

In the following two weeks, DJT shares surged by 130% from their low point, pushing the stock price back above $50 per share. Naked short selling, a form of securities fraud, negatively impacts the underlying stock. This significant rise in share price occurred after DJT had suffered a steep decline of 70% from March 27 to April 16.

DJT stock surge after reported naked short selling. Source: The Kobeissi Letter
DJT stock surge after reported naked short selling. Source: The Kobeissi Letter

The stock has shown a consistent upward trajectory since the company raised concerns about potential fraudulent activity with Nasdaq.

Former President Trump could benefit handsomely from DJT stock

Donald Trump has profited significantly from an earnout triggered when DJT shares traded above specific levels. According to a filing by Trump Media, the company determined on April 26 that the performance standard had been met and subsequently issued the earnout shares to Trump valued at $1.8 billion.

With these earnouts, the former president now owns 114.75 million shares of DJT stock, which amounts to 64.9% of the total outstanding volume.

The earnout shares Trump received are subject to lock-up restrictions, preventing insiders from selling or borrowing against their stock for six months.

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