More than two years after announcing the merger that would take it public, Trump Media, the parent company of Donald Trump’s social media network Truth Social, debuted on the stock market Tuesday under the ticker DJT.
Investors went wild.
Trump fans and small-business investors eager to profit from the stock’s rising price boosted the stock’s performance. Trump Media’s stock price surged nearly 60% on its first day, causing the Nasdaq stock exchange to momentarily halt trade.
Meme stocks also gained traction as a method to compete with hedge funds that had been shorting, or betting against, companies such as GameStop. Other investors were simply looking to make money. Regardless of the incentives for investing, experts have cautioned against the hazards connected with these erratic bets.
Experts predict that Trump Media will have a turbulent voyage, similar to these “meme” stocks.
“If you’re an investor looking for stable returns, I would not touch this with a 10-foot pole,” said Derek Horstmeyer, a finance professor at George Mason University in Virginia who specializes in corporate finance.
In it for the money
In early 2022, Mitchell Standley made his initial investment in Digital World Acquisition, the public shell company that later merged with Trump Media for its initial public offering.
Standley, a 39-year-old resident of Chandler, Arizona, had been an active member of the Wall Street Bets subreddit for several months. Recognizing the potential to capitalize on the stock’s popularity among former President supporters, he saw an opportunity to generate a profit.
He expressed, “I witnessed the unwavering dedication of his supporters and decided to give it a try myself. Surprisingly, I achieved significant financial success.”
His timing was impeccable; he made a $750 investment that turned into approximately $4,500 within just four hours before he decided to withdraw.
Standley decided to take a chance on Digital World’s stock once again when its price began to rise prior to its merger with Trump Media.
Last week, he employed a more sophisticated investing strategy by acquiring two “call options” for the company. One option was purchased for $100, while the other was bought for slightly over $160. Thanks to the strong demand for the stock, he found it effortless to sell off both options, resulting in a profit exceeding $3,000. (A call option grants an investor the right, but not the obligation, to buy a stock at a predetermined price.)
On his first day, Donald J. Trump had a successful start as the stock price of his social media platform, Truth Social, experienced a significant surge.
Standley, a registered independent, stated that his decision to invest in Trump’s social media company was not driven by any political motivations.
Investing to support Trump
Roberson, a 52-year-old resident of the Dallas-Fort Worth metroplex in Texas, shared that she acquired five shares of Trump Media at approximately $72 each, precisely when the stock price reached its highest point on Monday.
But she described the investment as “all fun and games.” For her, it’s about more than just making money. It’s about sending a message.
“It’s mostly about showing support for Trump and his legal battles, or making a statement,” she explained. “The main objective is to demonstrate that people are backing him.”
Roberson admitted that she has only dabbled in investing once before. It was during the early stages of the COVID-19 pandemic when the entire cruise industry came to a halt. In a gesture of support, she decided to invest in shares of Royal Caribbean’s stock.
With that kind of investment strategy, Trump Media closed Tuesday with a market value of almost $8 billion.
“I don’t believe that the company’s fundamentals support such a high valuation,” said Usha Rodrigues, a corporate finance and securities law professor at the University of Georgia’s School of Law. She emphasized that many investors were attracted to the opportunity of investing in the Trump brand.
According to recent filings, Truth Social’s parent company reported a revenue of $3.4 million in the first nine months of 2023. However, during the same period, they also incurred a loss of $49 million.
Is Truth Social the next GameStop?
Most experts agree that predicting stock market moves is a challenging task. However, they also believe that Trump Media will continue to experience volatility.
“It will resemble the GameStop scenario, with a fluctuation of ups and downs before experiencing another surge,” explained Horstmeyer from George Mason University.
According to the expert, the reason behind the stock’s current performance is not rooted in conventional metrics. Instead, investors are simply riding on waves of sentiment.
According to Rodrigues, an expert from the University of Georgia, investors face the potential of losing money when they invest in a stock solely based on the behavior of other investors, rather than considering the company’s performance.
