Trump Media recently filed the SEC Form S-1 to register all shares of the newly merged company for sale, potentially leading to a large selloff. The flood waters are rising in terms of the number of outstanding shares, including those held in escrow pending a resolution with certain stockholders, Earnout Shares, Alternative Financing Shares, and shares offered by the company. The Selling Securityholders will determine when and how they will dispose of the registered shares, potentially leading to a larger number of sellers than buyers in the market.
Although there is a 6-month waiting period for some shares, many shareholders will be free to sell, and Donald Trump may request a release from this requirement for his majority holding of shares. This imbalance between buyers and sellers, combined with the recent rise in the stock price, could lead to a trend reversal effect. Shareholders who acquired their shares at lower prices may choose to realize their profits and move on, potentially contributing to worry-based selling if the stock price weakens.
Investing successfully in this situation means recognizing the potential for a large selloff and taking action to protect investments. It is important not to wait and see if floodwaters will actually rise, as waiting could result in being swept downstream. Successful investors on Wall Street often take the approach of selling too soon and then reassessing the market conditions. It is better to take cover when the floodgates open and possibly buy back later if the market conditions improve, rather than taking unnecessary risks.
While the stock market may have seen an 8-day rise, it is important not to draw trendlines based on past actions. Shareholders who have been through the ups and downs of the market may prefer to capitalize on their profits and move on, especially given the uncertainty surrounding the stock price. A weakening in the stock price, particularly if it fails to hold above certain key levels, could trigger worry-based selling among shareholders, potentially exacerbating the selloff.
In conclusion, the recent filing by Trump Media to register all shares for sale has potential implications for the market dynamics. The floodgates may open for shareholders looking to sell, leading to a potential imbalance between buyers and sellers. In this situation, it is essential for investors to be proactive and consider taking protective measures to safeguard their investments. Selling too soon and reassessing the market conditions may be a prudent strategy to navigate the uncertainty surrounding the stock price and market dynamics.
