Former President Donald Trump’s social media company, Truth Social, owned by Trump Media & Technology Group, experienced a sudden drop in the stock market, leading to a temporary trading halt. The stock had been trading at around $31 per share before dropping below $29 and then below $27. The overall decrease for the day was 10%, ending 20% lower than its daily high. Despite the abrupt decline, there was no specific news or developments that could explain the drop, as Trump Media’s stock is known for being volatile.
CEO of Tuttle Capital Management, Matthew Tuttle, suggested that technical factors may have caused the selloff. He mentioned that when Trump Media’s share price failed to break through its 200-day moving average, traders may have started betting against it. Prior to the sudden decline, Trump Media had experienced significant growth, doubling its value in just three weeks, driven by uncertainty surrounding the upcoming presidential election. Professor Jay Ritter of the University of Florida noted that the trading volume for Trump Media was substantial on the day of the drop, likening the stock to meme stocks like GameStop and AMC.
Ritter explained that meme stocks are often influenced more by momentum and short-term trading strategies rather than fundamental factors, which can lead to sudden and drastic price movements. Despite the significant drop in value during the trading day, Trump’s stake in the company, totaling 114.75 million shares, was still valued at $3.1 billion by the end of the day, down from $3.88 billion at its peak. This was the second time Trump Media had faced a trading halt, with the previous one prompting Trump to criticize Nasdaq and consider a change to the New York Stock Exchange.
Following the trading halt and decline during the day, Trump Media’s shares saw a 2% increase in after-hours trading. The volatility and sudden movements seen in Trump Media’s stock highlighted the challenges of investing in meme stocks and the influence of short-term trading strategies on price fluctuations. The trading patterns observed in Trump Media’s stock mirrored those typically seen in meme stocks, where a shift in sentiment can lead to a mass movement from investors in the same direction. Despite the uncertainties surrounding the stock, Trump’s involvement and the potential for future developments in the company may continue to impact its performance in the market.
