What’s next for Truth Social (DJT)? Investors should be prepared for all outcomes and learn to expect the unexpected. Truth Social and its leader, former president and current presidential candidate Donald Trump, are divisive but impossible to ignore. I am neutral on DJT stock but feel that it may be appropriate for a small-sized share position for people who can tolerate volatility and risk.
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Truth Social is a social media platform that’s owned by Trump Media & Technology Group. The company focuses on free speech and sometimes expresses the politically conservative viewpoints espoused by Trump. While Truth Social has a presence on social media, the company is also involved in TV streaming and recently inked a deal to build out its “content distribution network for streaming of linear TV.”
It may be challenging to separate one’s political beliefs from one’s stance on Truth Social stock. Yet, staying objective can allow for a more informed strategy, especially when it comes to position sizing. Therefore, it is possible to form a clear-minded approach, even when evaluating a controversial company like Truth Social.
Truth Social: Concerns to Consider
As the November 5 U.S. presidential election draws near, investors can try to set their political beliefs aside but also can’t afford to disregard the impact of political news events. With this in mind, Truth Social stock is prone to bouts of volatility due to political headlines, and that’s a reason to keep one’s position size small.
For example, DJT stock swung wildly when Trump was convicted of multiple counts in a recent hush-money trial. Interestingly, the Truth Social share price sank and then recovered upon that announcement. It just goes to show that this is a volatile and unpredictable stock, and you can never tell exactly how the market will react to any given news event.
Plus, here’s a notable wrinkle in this news story. Trump’s sentencing for the hush-money convictions has been delayed until September 18 at the earliest. That’s pretty close to the November 5 election date. There could be more delays in Trump’s sentencing, so there’s no way to know whether the sentencing will happen before or after the election. So, that’s another concern to consider if you’re thinking about investing in Truth Social.
Truth Social and Share Dilution Issues
Furthermore, there’s the issue of potential share-value dilution. Not long ago, the Securities and Exchange Commission (SEC) approved a Trump Media & Technology Group regulatory filing that allows the company’s investors to convert derivatives (warrants, more specifically) into common-stock shares. Consequently, if and when these warrants are exercised, there could be more Truth Social common shares in circulation.
There is a dark side to issuing warrants that can be converted into common shares, since this can dilute the value of the currently existing Truth Social shares. However, the bright side is that Truth Social can raise money to firm up its balance sheet when it sells warrants.
In a press release, Trump Media & Technology Group claimed that the company has taken in “more than $105 million in cumulative proceeds” due to the “cash exercise of warrants between June 20 and July 1, 2024.” With that, Trump Media & Technology Group stated that, as of July 1, the company had over $350 million in cash and no debt on its balance sheet. This should enable Truth Social to extend its capital runway, and therefore continue its operations, for a while at least.
Two Impactful Events
On top of all that, investors will certainly want to read the headlines every day and think about how they might affect Truth Social and its stock price. Two recent events stand out as particularly impactful, and so far, the market has perceived them as positive for Truth Social.
First, there was the presidential debate in June between Trump and President Joe Biden. Some viewers likely agreed with Isaac Boltansky, BTIG director of policy research, who concluded that Trump “won the debate.”
Even with that, though, DJT stock rose but then fell. Once again, there’s no way to know with certainty how the market will respond to any given event.
Moreover, there was a tragic and unfortunate assassination attempt on Trump during a rally in Pennsylvania this past weekend. Perceived odds of a Trump presidential victory reportedly increased after the assassination attempt, and consequently, DJT stock rallied sharply today. However, the tide of sentiment can turn at any given moment, and the election is still several months away.
Conclusion: Should You Consider Truth Social Stock?
Truth Social stock isn’t necessarily a vote for or against any political candidate. More than anything else, it’s a stake in a business that’s focused on a social media platform. On the other hand, there’s no denying that news events regarding Trump and Biden will affect the Truth Social share price.
Hence, investors should brace for volatility and be aware of politics but not allow biases to enter into the equation. Perhaps most importantly, I believe any share position in Truth Social should be small so as to reduce the risk. When all is said and done, I am not currently considering taking a position in DJT stock but feel that the stock may be appropriate for some portfolios as long as due precautions are taken.
