Shares of Donald Trump’s social media company experienced a notable 16% increase in value during its first day of trading on the Nasdaq. This surge not only enhanced the worth of Trump’s significant stake in the company but also benefited the fans who had bought shares as a display of support for the ex-president.
Trump Media & Technology Group Corp. completed its merger on Monday with Digital World Acquisition Corp., a blank-check company. As a result, Truth Social, the social media platform operated by Trump Media, has now replaced Digital World on the Nasdaq stock exchange.
The company’s shares surged by 16.1%, closing at $57.99, resulting in a market value of $7.85 billion. At its peak, the stock witnessed an impressive increase of approximately 59%. This surge has significantly boosted Trump’s ownership stake in the company, which now stands at nearly 60% and is valued at around $4.6 billion.
Small-time investors, driven by their support for Trump or their desire to capitalize on the frenzy, make up a significant portion of those investing in Trump Media. Unlike large institutional and professional investors, these shareholders played a crucial role in boosting Digital World’s stock, which surged by over 100% this year as they eagerly anticipated the successful completion of the merger.
Truth Social was launched in February 2022, a year after Trump’s banishment from major social platforms, such as Facebook and X (formerly Twitter), due to the January 6 insurrection at the U.S. Capitol. Despite being reinstated on both platforms, Trump has chosen to stick with Truth Social.
Users on Truth Social were actively engaging with each other on Tuesday, discussing their experiences as shareholders and seeking advice on how to purchase shares.
Some users are encouraging conservatives to support the DJT stock and drive liberals crazy by sending its value over $100 per share. They believe that buying this stock is a way to show their support for the Make America Great Again (MAGA) movement.
Devin Nunes, the CEO of Trump Media and a former House Republican, expressed his enthusiasm for the company’s goal of reclaiming the Internet from the control of Big Tech censors. He emphasized their commitment to this vision, stating that they will passionately pursue it as a public company.
Investors may face a rough journey despite their excitement. This is because they are putting their bets on a company that has uncertain chances of becoming profitable. Trump Media incurred a loss of $49 million in the initial nine months of the previous year. During that time, it generated only $3.4 million in revenue while having to pay $37.7 million in interest expenses.
The company highlighted in a recent regulatory filing the risks that investors face due to the high failure rate of new social media platforms. It also acknowledged that its operations are expected to incur losses for the foreseeable future.
According to research firm Similarweb, Truth Social had approximately 5 million active users on mobile and web platforms in February. While this number pales in comparison to TikTok’s 2 billion and Facebook’s 3 billion users, it still surpasses other alternative tech platforms like Parler.
Trump Media has made it clear that they do not monitor certain metrics that their competitors use to gauge their success, such as average revenue per user or active user accounts. Their focus is on long-term goals rather than making hasty decisions based on short-term results.
Skeptics anticipate challenges for the company in the long run, as it is estimated to have significantly fewer users compared to its competitors. In a business where achieving a critical mass is crucial, this could pose difficulties for the company.
According to Jay Ritter, a professor and expert on initial public offerings of stock at the University of Florida’s Warrington College of Business, there is a potential for the stock price to decline by 95% in the future.
According to Brian Dunn, director of the Institute for Compensation Studies at Cornell University, the excitement surrounding Trump Media shares can be likened to the phenomenon of meme stocks, which catapulted companies like GameStop and AMC Entertainment to unprecedented levels in 2021.
According to Dunn, as long as there is always someone willing to buy the stock at the same price you paid for it, you can continue to be successful. However, he cautions that smaller investors may be left with the stock when the market cools down.
On Monday, Trump expressed to reporters that Truth Social is thriving and gaining popularity. He described it as being “hot as a pistol” and performing exceptionally well. The following day, he took to the platform itself to express his love for Truth Social, emphasizing his appreciation for the truth it promotes.
According to a recent regulatory filing, Trump Media, a Florida-based company, has acknowledged its high dependence on the popularity and presence of President Trump. The company recognizes that there are associated risks tied to Trump’s significant influence.
In a filing prior to the merger with Digital World, the company stated that if the former president were to reduce or end his association with the company, whether due to his campaign to reclaim the presidency or any other reason, the company would face significant disadvantages.
Trump Media and Truth Social could face negative consequences if one or more of the legal proceedings in which Trump is involved result in an unfavorable outcome, the company acknowledged.
The company also expressed concern about the potential risks associated with Trump being a controlling stockholder. According to their statement, Trump’s ability to vote his shares in his own interest may not always align with the interests of all the shareholders as a whole.
