Former President Donald Trump’s new media venture is facing a decline in investor confidence just one week after its initial public offering. The company’s stock price has taken a significant hit, resulting in a loss of $4 billion in its overall value.
Trump Media & Technology Group’s shares, which made their debut on the Nasdaq Composite Index on March 25 under the ticker “DJT” (after the former president’s initials), have experienced a significant decline. This follows the company’s disclosure of mounting losses in a regulatory filing. Furthermore, the company’s accountant has issued a warning, expressing doubts about its ability to continue operating as a going concern.
The shares of Trump Media & Technology Group, which holds the Truth Social platform as its main asset, experienced a significant decline on Monday. The stock dropped by $13.30, or 21%, reaching a price of $48.66. This is below its opening price from the previous Monday, which was $49.90 per share. Furthermore, it reflects a substantial 39% decrease from the stock’s peak of $79.38 on March 26.
Despite experiencing a slight decline, the stock of Trump’s media company, which recently went public, is still trading higher than before the deal. Prior to the public offering, the shares were traded under the name Digital World Acquisition Corp., which served as a vehicle for taking Truth Social public. Despite Monday’s dip, the stock has seen a remarkable surge of 178% this year.
According to recent reports, Donald Trump, the majority owner of the recently public company, has seen a significant loss of $2.5 billion in paper value due to the decline in stock prices. Currently, his stake is valued at $3.8 billion, a considerable drop from its peak of $6.3 billion just last week.
Despite being in financial trouble and generating only $4.1 million in revenue last year, Trump Media still manages to maintain a significant market capitalization. Even after experiencing a stock plunge on Monday, the company is valued at $6.7 billion, surpassing the worth of companies like Bausch & Lomb, Alcoa Corp., and Harley-Davidson, all of which have annual revenues in the billions.
Trump Media’s valuation has been skyrocketing, leading to comparisons with “meme” stocks such as GameStop. Unlike institutional investors who focus on profitability and revenue growth, these stocks attract individual investors through social media buzz.
Truth Social has positioned itself as a viable alternative to well-established tech giants like Meta’s Facebook, who also faced setbacks in their early stages.
According to Michael Pachter, an analyst at Wedbush Securities, GameStop was the ultimate meme stock. However, Trump Media has surpassed its notoriety, as mentioned by Pachter in a statement to the Associated Press last week.
Trump Media & Technology Group has recently released additional information regarding its financial performance. In the year 2023, the company reported a total revenue of $4.1 million, which represents a significant increase from the $1.5 million recorded in the previous year. However, the company also experienced a loss of $58 million in 2023, in contrast to the $50 million profit generated in the prior year.
Furthermore, the accountant of the company has raised concerns about the losses incurred, which have cast doubt on the company’s ability to sustain its operations. Nevertheless, it is important to consider that these concerns are based on the current situation of the company. There is still potential for the company to expand its user base, increase its revenue, and ultimately turn its losses around, leading to a more stable future.
Trump’s stake locked up
Trump’s majority stake in Truth Social’s parent company is set to bring him billions of dollars, providing a much-needed financial boost for the former president in light of his growing financial obligations.
However, Trump is currently unable to access the stock. This is due to a “lock-up” provision, which restricts him and other company executives from selling the stock for a minimum of six months. Lock-up provisions are frequently implemented in IPOs to prevent insiders from quickly offloading their shares following a company’s public debut.
According to a report by Europa Group analysts, it is challenging for Trump to sell his stock in the company for the next six months. This makes it difficult for him to convert the value of Truth Social into cash that can be used for his campaign. However, the analysts suggest that this outlook could potentially change in the future. If Trump is able to obtain a waiver or find a lender who is willing to accept shares in Trump Media as collateral, it may become easier for him to access the funds he needs.
