Michael Hiltzik: With his Truth Social stock, Trump may be laughing all the way to the bank -- but his investors have reason to weep

The annual report also updated Trump Media's financial statements to cover the full year 2023: The platform lost more than $58 million on revenue of a bare $4.1 million. Previous disclosures had covered only the first nine months of 2023, when the company said it lost $49 million on $3.4 million in revenue.

On Monday, shareholders got another surprise. Trump Media said in a public filing that it planned to issue 40 million new shares to insiders (36 million of them to Trump himself) and that warrant holders were entitled to 21.5 million additional shares of stock, which could be expected to reach the open market almost immediately upon the warrants' conversion.

That means existing shareholders are about to be heavily diluted, left with less of the company than they anticipated. The shares plunged more than 18% on Monday.

Who benefits from these maneuvers? Trump does. He is in effect the owner of 64.9% of the company, including the 36 million new shares; no one else owns more than 7.3%. For him this isn't much of an investment; 36 million of his 114.7 million shares are a handout that didn't require him to put up his own money. The rest were issued to him via the IPO in return for his interest in Trump Media as a private company.

Trump's financial role in the founding of Truth Social in 2021 may have been minimal or nonexistent; Reuters reported in 2022 that most of the $38 million raised in the company's first year came from businessmen who were political allies of Trump and from borrowings from unidentified lenders.

Trump has almost no ability to convert his shareholdings to cash in the near term, however. As a Trump Media insider, he is prevented from selling or borrowing against his shares for at least six months.

If and when he places any of his shares on the market, he would be selling into a declining market. Trump Media is the memiest of "meme stocks," its value entirely divorced from financial fundamentals and based entirely on his involvement in the enterprise.

That places the value of his stake on a knife-edge. Any indication that he is reducing his commitment would almost certainly provoke a stampede for the exits among other shareholders. Trump would be racing to cash in before the value of his holdings reached the vanishing point.

Who are the other shareholders? According to a survey by the Washington Post, many are retail investors who believe that Trump's touch is gold, or thought that buying his shares was a way to express faith in Trump and perhaps make some money on the side. At this moment, they are staring into the abyss.