Thursday was another rough day for Mr. Market, with the Dow plummeting 533 points (1.29%) to 40,665.02. The S&P 500 dropped 0.78% to 5,544.59, and the Nasdaq slid 0.70% to 17,871.22. Investors are continuing to bail on tech stocks, cashing in on recent gains.

Today’s sell-off was a team effort, with all but one of the 11 S&P 500 sectors and nine out of ten Dow stocks tanking. The Russell 2000, the small-cap underdog, dropped 1.9%.

The silver lining? DR Horton jumped 10% to an all-time high after announcing stellar third-quarter earnings and new share buybacks.

Before I get to our main story, check out today’s heatmap.

SEC Sues Ex-DWAC CEO for Faking Trump Media Merger, Causing 400% Stock Explosion

If you’re tired of the onslaught of Trump stories thrown at you this week, it may be a good time to sit this one out. But if you're in for another round of “Trump tea”, here it goes:

 

The SEC has slapped Patrick Orlando, former CEO of Digital World Acquisition Corp. (DWAC), with a lawsuit, alleging he pulled a fast one on them. Orlando, it seems, was playing peekaboo with Trump Media & Technology Group, telling the SEC he had no merger plans while cozying up to Trump’s team the entire time. He got the boot in March 2023, just a year before Trump Media debuted onto the Nasdaq stage.

Trump, never taking no as an answer, founded his social media company in 2021 after getting blackballed from major platforms post-January 6th.  In true Trump fashion, he didn't just quietly start up – he merged Trump Media with DWAC, a deal announced in 2021. 

This caused the stock price to soar higher than his poll numbers after the recent debate with Biden.

Now, if you thought DJT stock was stable, you’d be wrong. It’s been on a roller coaster almost directly correlating to the highs and lows of Donald Trump’s political career. 

The stock hit a high of $79.38 per share on March 26, only to nosedive to $22.84 on April 16. 

It climbed during Trump’s hush money trial but started tumbling down again after he was found guilty on 34 felony counts. 

The stock didn’t start to recover until just a week before a debate and then shot up again after an assassination attempt on Trump in Pennsylvania on July 13,. A day that will go down as one of the biggest question markets in history.

Despite all of this, Trump Media has been losing money faster than a gambler who just discovered SuperStonks reddit. In 2023, it was revealed they made $4 million but lost over $58 million. That’s a profit margin of about -1,350%. 

To add insult to injury, the accounting firm BF Borgers CPA PC, which audited Trump Media, was shut down by the SEC for "massive fraud." The SEC called it a "sham audit mill," saying its audits, included in over 1,500 SEC filings, were about as reliable as a used car salesman’s promises. Maybe that’s why the P and L are so horrible. Perhaps something for Trump’s team to look into.

The SEC claims Orlando fibbed when he said DWAC wasn’t talking to any merger targets. Meanwhile, he was having secret rendezvous with Trump Media for months. DWAC raised $287.5 million in its IPO on September 8, 2021, and then announced its merger with Trump Media in October 2021. The stock price soared over 400% in one day, and if you were lucky enough, maybe you were in on that trade.

(Source: Miami Herald)

The SEC is gunning for Orlando, wanting him permanently banned from any more shady dealings and demanding he hand over any ill-gotten gains and pay some hefty fines.

So far, neither Orlando nor anyone at Trump Media has commented. Just to be clear, I’m not pointing fingers at Trump here. It looks like Orlando cooked up this scheme all on his own. And with Trump about to make his first public appearance since the assassination attempt, I’d be lying if I said I won’t be on the edge of my seat. Oh and if you were wondering how this news is affecting Truth Social, Trump Media is up 2.58% today at the time of this writing.

Stock.News does not have positions in companies mentioned.