Trump’s social media stock is tanking. Here are 2 possible reasons.

Donald Trump’s stake in his social media company has gotten less valuable as the stock has fallen. But Trump’s shares are still worth $2.4 billion.

Earlier this year, Donald Trump’s social media company was worth something like $9 billion.

But that was then, and its stock has been sinking since: Now investors think Trump Media & Technology Group Corp — the company that runs Truth Social, Trump’s Twitter clone — is worth a mere $4 billion. Today its stock closed at just above $20 a share, the lowest it has been since the company had its equivalent of an IPO in March.

What’s going on?

To start, a caveat we’ve mentioned before: DJT is a meme stock. Investors aren’t valuing it based on the company’s financials, which are very meager at best. They think it’s worth something because other people think it’s worth something, and that collective fantasy will work right up until it doesn’t.

So trying to figure out why DJT is moving up or down on any given day isn’t likely to lead to a satisfactory answer. Mostly you’re going to get something along these lines: ¯_(ツ)_/¯

Still. We can at least acknowledge that DJT has been sliding for quite some time. So there’s something going on.

One reason Trump’s stock may be moving down is that lots of people who own Trump stock are Trump fans, and/or people betting that Trump will win the November election. But it has been harder to be in one of those groups recently: Since Kamala Harris replaced Joe Biden as Trump’s opponent, Trump has been losing ground in the polls, and now both The New York Times and pollster Nate Silver see him as a slight underdog.

So if DJT is a proxy for Trump’s election chances, it would make sense that it has been limping recently.

The other very plausible reason that Trump stock is moving down is that investors may be worried about Trump selling some of his shares in the company. This could lead to other investors selling, which would have a cascading effect on the share price.

Trump currently owns about 60% of Truth Social, which means his stake is worth about $2.4 billion. He’s been restricted from selling any shares because of a lock-up restriction, which are common in public offerings. But the lock-up period could end as soon as September 20 — hence people trying to get out of the stock before he does.

There are two arguments against that theory, by the way: The first is that the lock-up period has been public knowledge since Truth Social first went public, so why bail now? The second is that Trump knows that if he does sell stock — and particularly if he sells a lot of stock — that the stock will really collapse. Because all but the most die-hard Trump fans will see it as the end of the company.

So there’s a real tension there: Does Trump keep his theoretical $2.4 billion stake intact? Or does he try to turn it into actual money, and risk making the overall value much less?

In any case, it’s possible that both of the ideas above — Trump’s declining political fortune, and the idea that he may be ready to trigger a big sell-off himself — are true. Or maybe there’s something else at work that we have yet to see.

The only thing we know for certain is that if you bought Trump stock in late March and haven’t sold it since then, you are down by more than 50%. We don’t give investment advice around here. But don’t say we didn’t warn you.