Shares of Trump Media & Technology Group (DJT 2.54%) are falling this week. The company's stock had plummeted 16.7% at 2:16 p.m. ET. The fall comes as the S&P 500 index has risen 1.4% and the Nasdaq-100 index has risen 1.1%.
Trump Media announced on Tuesday that it is pursuing a new strategy of Bitcoin accumulation. The company is raising $2.5 billion in a private deal to create what will be the largest Bitcoin reserve held by a private company.
Strategy's strategy
Following in the footsteps of Michael Saylor's Strategy, Trump Media is betting a massive reserve of Bitcoin will drive future value. The company announced it is raising $2.5 billion through a private placement in exchange for $1.5 billion in common stock and $1 billion in convertible notes.
The proceeds will go to purchasing Bitcoin, which the company will then hold as a core Treasury asset. Custodial services will be provided by Anchorage Digital and Crypto.com. The announcement was made as the Bitcoin 2025 Conference kicked off in Las Vegas.
Image source: Getty Images.
CEO Devin Nunes pitched the move not just as a way to drive value, but as a political one, saying that holding Bitcoin is a hedge against "financial discrimination" and calling it "the apex instrument of financial freedom."
Skepticism is warranted
Trump Media has a market cap of nearly $5 billion, despite sales last quarter of just $820,200. It is operating deep in the red with no clear path to profitability or sales growth. This stock is built almost entirely on hype, in my opinion, and investors would do well to stay away. Trump Media wasn't a good investment before today's announcement, and it is not one now, as the deal will likely dilute existing shareholders' portfolios.
