Trump Media Has Some Stock to Sell

Obviously Trump Media & Technology Group Corp. should sell stock. It is a highly valued public company stapled to a teeny little operating business: Last quarter it had revenue of $770,500 from selling ads on its social media site, and its operating cash flow was negative $9.3 million.1 Its equity market capitalization is around $7 billion. People value the stock at $7 billion not because they project high future operating cash flows but because Trump Media has “Trump” in the name, is largely owned by Donald Trump, and represents a bet on his electoral fortunes and general newsworthiness. Those have gone up recently. Converting Trump’s newsworthiness into money is, as far as I can tell, the point of Trump Media, and now is the time.

Traditionally the way meme-y companies raise money is with at-the-market stock offerings. In an ATM offering, the company hires a broker, and the broker sells some stock, at market prices, over the course of days or weeks. This is different from a traditional underwritten offering, in which the company’s investment bank markets the stock to big investors, builds an order book, and then sells a chunk of stock all at once, at a single price, to all of those investors. The problem with a traditional underwriting, for a meme stock, is that your banks call up all the professional investors and say “hey do you want to buy this stock at a crazy price?” and the investors say “no I do not.” Being a meme stock means that retail investors are buying the stock at a crazy price, and the big investment banks can’t really call them all. So meme stocks do ATM offerings, so they can sell the stock directly on the exchange, where the retail investors are buying it at crazy prices.