On Monday, DJT Media & Technology Group Corp (TMTG), the operator of the Truth Social platform, experienced a boost in trading after announcing that it is expecting to receive over $69.4 million from the cash exercise of warrants on June 20 and 21, 2024.
The cash exercise option became available after the Securities and Exchange Commission (SEC) declared TMTG’s registration statement effective on June 18, 2024. If all warrants covered by the registration statement are exercised for cash, TMTG could receive up to approximately $247 million. Additionally, $40 million of restricted cash will become unrestricted as a result of the effectiveness of the registration statement. This injection of funds adds to TMTG’s over $200 million in unrestricted cash already held as of June 18, 2024. These funds are likely to support further development and expansion of its platforms, including Truth Social.
Despite its recent market value decline, with TMTG’s stock dropping nearly 50% since May 30, experts caution that TMTG remains overvalued. Truth Social still has a way to go before it can compete with platforms like Elon Musk’s X, Reddit Inc (RDDT), and Meta Platforms Inc (META) Instagram Threads. Some experts draw parallels between TMTG and meme stocks like GameStop Corp (GME) and AMC Entertainment Holdings, Inc. (AMC), which trade based on momentum rather than fundamentals.
Former President Donald Trump, who holds a dominant stake in TMTG with 114.75 million shares worth about $3 billion since late May, has seen his stake drop significantly since then. The company intends to use the funds raised from the cash exercise to improve its ad platform and explore potential mergers and acquisitions. As of now, TMTG stock has gained an impressive 118% in the last year and is currently trading higher by about 7% premarket at $29.63 per share.
In summary, while there are concerns about whether TMTG is being valued correctly due to its recent market decline and competition from other social media platforms like Elon Musk’s X and Reddit Inc., experts believe that this cash influx will help support further development and expansion of its platforms such as Truth Social.
