Trump Media shares are hitting a new low, and this may not be the lowest it’s ever been

Actions of Trump Media & Technology Group (DJT -1.72%) have fallen in recent months to new lows as investors turned bearish on the once high-flying stock.

It might seem like a good buying opportunity for fans of the former president, but they’ll want to take a closer look at the business as there’s still plenty of risk involved, and the stock could drop even less in the coming months.

Lock-up agreements are ending soon

Former President Donald Trump is the majority owner of Trump Media, and as of this writing, a lock-up agreement prevents Trump and other insiders from selling their shares in the company since it went public so recently.

But later this month, possibly as early as Sept. 20, those agreements will begin to expire, and it could be an opportunity for the former president to cash in.

Many investors may be anticipating such a move and are selling their shares ahead of the potential sell-off later this month. If Trump cashes in a significant portion of his stake in the company, that could trigger stop losses and give investors even more incentive to dump their own shares.

Trump remains the face of the company, and investors will likely interpret any selling by him as a sign that he lacks confidence in the stock. Investors often look to insider trading to gauge the sentiment of people inside the company. The more shares Trump sells, the more likely investors will interpret the news.

Why the stock might struggle either way

Beyond the expiration of the lockup, Trump Media could still be headed lower for the simple reason that it looks more like a meme stock than a solid long-term investment. Not only does the business generate little revenue (just $0.8 million in the second quarter), but the number of users on its social platform is likely modest because Trump Media doesn’t report many key metrics.

The company says it is “focused on growing Truth Social by improving its features and user interface, rather than based on traditional performance metrics such as average revenue per user, ad impressions and prices, or active user accounts, including active users monthly and daily”.

Some estimates suggest that Truth Social may have 5 million active users. By comparison, X (formerly Twitter), which Trump has been active on in the past, had about 368 million monthly active users as of last year. Meta platformswhich owns Facebook, WhatsApp and Instagram, has billions of active users.

No one expects Truth Social to be anywhere near these numbers in its early stages, but the failure to report user numbers is a red flag. For social media stocks, such numbers are a key metric for both investors and advertisers, as they help demonstrate how popular a platform is and how much value it has.

The absence of such reporting suggests that Truth Social is not growing as much as management would have hoped, which again supports the possibility that Trump will sell at least some of his holdings sooner rather than later.

In the first six months of the year, Truth Social incurred an operating loss of $117 million and used nearly $31 million in cash from its day-to-day operating activities. While it still has cash and cash equivalents totaling $344 million, which should be enough to keep the business afloat, its financials could worsen as it ramps up spending on growth initiatives, including the launch of its TV streaming platform.

The bottom could be even lower

Without a rapidly growing user base — and with the company likely struggling to turn a profit for the foreseeable future — there are plenty of reasons why Trump Media stock could continue to hit new lows. There simply isn’t a business to invest in today, and this is a stock whose freefall may be far from over.