Trump Media’s first-quarter financial statements were released on May 20, revealing negative earnings of $327 million. However, this number is misleading as it includes market-priced stock issuance items related to loan repayments and employee compensation. With low revenues and negative operating income, analysts are trying to understand the company’s strategies and management expectations. Despite the importance of these reports, Trump Media failed to provide a public earnings call for analysts to gain confidence in the business outlook.
Without fundamental support from management, investors are closely watching the stock price trend. The stock recently attempted to break above the $50 barrier, only to experience weak Friday closes. Following the earnings report release, the stock dropped to the interim barrier of $45 on May 21. With a weak technical picture, the stock is at risk of a technical plunge as investors may start selling off their shares.
Short sellers, who sell weak company stocks by borrowing shares in the hope of buying them back at a lower price, are still active in the market. However, shareholders who are likely to sell their shares outnumber short sellers. Many shareholders have millions of shares awaiting SEC registration approval to sell, acquired through loan conversions or as payment. If the stock continues to drop, these shareholders may not have a strong desire to hold onto their shares.
The advice from Wall Street to “Don’t fight the tape” emphasizes the importance of recognizing a stock’s trend. As Wall Street focuses on the future rather than the past, a falling stock price can quickly undo any previous excitement surrounding a company. With Trump Media’s stock at risk of a technical plunge and an influx of shareholders likely to sell their shares, investors are advised to pay attention to the stock price trend and avoid fighting against it.
