Why Trump Media Stock Is Soaring Today

Trump Media (NASDAQ: DJT) stock is posting big gains in Wednesday's trading following the expiration of its lockup period. The company's share price was up 9.3% as of 11:30 a.m. ET. Shares had been up as much as 13.2% earlier in the daily session.

Trump Media went public through a merger with a special purpose acquisition company (SPAC) in March, and insiders at the social media company had been prevented from selling shares for six months. The lockup period expired on Friday, and the additional two-day window requiring insiders to disclose stock sales concluded yesterday.

Trump Media stock passes lockup expiration test

Thus far, Trump Media hasn't seen a wave of insider selling -- and that's good news for the stock. Investors had been worried that the expiration of the lockup period would be followed by a large amount of stock being sold on the market.

If insiders moved to sell large blocks of stock, the company's share price would have faced intense pressure. Potential selling by one shareholder, in particular, has been under the microscope.

Donald Trump is Trump Media's majority shareholder and owns roughly 60% of the company. Earlier this month, the former president and current presidential candidate said he didn't plan to sell Trump Media stock. With early signs that the lockup expiration won't be followed by a wave of shares hitting the market, the stock is seeing big gains today.

What comes next for Trump Media stock?

In the second quarter, Trump Media recorded a net loss of $16.4 million on revenue of only $828,000. The company ended Q2 with approximately $344 million in cash and zero debt, so the loss it posted in the period isn't a dire signal. However, there's plenty of uncertainty about what comes next for the business.

Right now, the cornerstone of Trump Media's business is Truth Social -- a social media platform that's similar to X, the platform formerly known as Twitter. Compared to major social media platforms, Truth Social has a small user base and is posting uninspiring levels of monetization. Despite some positive catalysts related to the presidential election, it's not clear that the service is gaining meaningful traction.

With the stock still down roughly 79% from its high, it's possible that Trump Media stock will continue to enjoy a rebound rally in the short term following easing insider-selling fears. But the company still hasn't given investors a clear road map for what its expansion plans look like, and the stock remains a risky speculative bet.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.