The company behind Donald Trump’s Truth Social platform has made its debut on Wall Street, with an initial trading price of approximately $78.
The newly introduced stock, DJT, experienced rapid fluctuations within minutes of trading. After a significant initial surge in the share price, it settled at around $70.
Shareholders of Truth Social, the platform founded by former president Mr. Trump, made the decision on Friday to take the company public. This strategic move has the potential to significantly increase Mr. Trump’s net worth, providing a much-needed influx of funds to address the court-ordered judgments against him.
To halt the enforcement of a $454 million penalty, Mr. Trump must either tap into his own funds or seek assistance from a surety company in order to post an appeals bond by Monday. This bond is crucial in blocking the penalty after a New York judge determined that he had defrauded banks and insurers.
His attorneys are requesting a state appeals court to temporarily suspend the judgment against him while he appeals. They argue that it is practically impossible for him to pay tens of millions of dollars, considering the fact that approximately 30 bond companies have rejected his prized real estate empire as collateral.
Political action committees that support the Republican Party’s likely nominee to challenge President Joe Biden in the upcoming November election are facing significant financial losses. These losses are attributed to the substantial amounts of money being spent on legal bills and attorneys’ fees for the nominee. These expenditures come at a time when criminal proceedings are scheduled for the summer and the general election is just around the corner.
The public introduction of Trump Media & Technology Group, the parent company of Truth Social, has the potential to greatly benefit the financial status of the former president. However, it is important to note that any significant financial gain will not be realized immediately.
On Friday, Truth Social shareholders gave their approval to the much-awaited merger between Trump Media and Digital World Acquisition Corporation, after facing delays due to investigations by regulators and the US Department of Justice.
Major shareholders of Trump Media are prohibited from selling their shares for a period of six months under the terms of the agreement. This standard provision is often implemented to safeguard against any indications of internal instability or doubts about the company’s prospects, and it also applies to the former president.
With a 60 percent stake in the company, Mr. Trump has effectively used it as a platform for his presidential campaign, gaining extensive media coverage and generating millions of dollars in free publicity whenever he posts a controversial message.
Wall Street has estimated the value of Trump Media at approximately $14 billion, although experts argue that this valuation is fundamentally flawed. Since the merger, Digital World Acquisition Corporation, now known as Trump Media, has witnessed a staggering 200% increase in its share price this year.
Despite Truth Social losing users, Trump Media’s rising share price and high valuation continue to soar, defying the company’s financial losses.
According to Jay Ritter, a finance professor at the University of Florida, the current situation is highly unusual. He stated in an interview with CNN, “The stock is completely disconnected from its underlying fundamentals.”
According to Mr. Ritter, a comparable example would be the rise of “meme stocks” like GameStop and AMC during the pandemic, driven by retail traders. He estimates that Trump Media is currently valued at approximately $2 per share. As of 10am on Tuesday, it was trading at around $68 per share.
According to Mr. Ritter, the business at its core does not hold much value. He states that there is no indication that this company will grow into a highly profitable entity. Mr. Ritter expresses his belief that the stock price will eventually decline to $2 per share, and it could potentially drop even lower if the company exhausts the funds it received from the merger.
Last year, Trump Media incurred a loss of $49m despite generating revenue of $3.4m in the first nine months. In contrast, Reddit, which brought in $804m in the same period, was valued at $6.4bn during its recent initial public offering. This is a significant difference compared to Trump Media’s revenue of $5m.
According to Matthew Kennedy, a senior IPO strategist at Renaissance Capital, he stated to CNN that the current levels of the company’s stock seem to be disconnected from its actual business performance.
According to him, valuations ultimately rely on fundamentals. This implies that there is a significant possibility of this stock experiencing a sharp decline in the future.
