Trump Media & Technology Group Corp., the owner of Truth Social, made its debut on the Nasdaq stock exchange under the ticker symbol "DJT" on Tuesday.
The company was acquired by Digital World Acquisition Corp., taking Digital World's place on the exchange. The stock opened near $50 per share, valuing the company at a staggering $6.8 billion.
Trump's Social Media Company Valuation
AP notes that despite its hefty valuation, Trump Media has yet to turn a profit. In the first nine months of last year, the company reported losses of $49 million, with only $3.4 million in revenue.
Truth Social, the social media platform launched by Trump Media in February 2022, has faced challenges in attracting users. While the company has not disclosed its user numbers, research firm Similarweb estimates that Truth Social had approximately 5 million active users in February.
The valuation of Trump Media has raised eyebrows among experts, with some warning that it may be divorced from reality. Shares of Digital World Acquisition Corp., the shell company that became Trump Media, have surged nearly 200% this year, despite the company's financial struggles.
Analysts have compared the situation to the meme stock phenomenon seen with companies like GameStop and AMC during the COVID-19 pandemic.
Truth Social's user base pales in comparison to its competitors. With just 494,000 monthly active users in February, the platform is significantly smaller than major social media players like Facebook and X (formerly known as Twitter). Moreover, Truth Social's user numbers have been declining, facing a 51% decrease year over year.
(Photo : CHRIS DELMAS/AFP via Getty Images)
TOPSHOT - This illustration photo shows a person checking the app store on a smartphone for "Truth Social", with a photo of former US president Donald Trump on a computer screen in the background, in Los Angeles, October 20, 2021.
What This Holds for Donald Trump
The success of Truth Social is closely tied to the popularity and presence of former President Donald Trump, who owns a dominant stake of 79 million shares in Trump Media.
The company acknowledged in regulatory filings that it is highly dependent on Trump, and any adverse outcomes in his legal proceedings could negatively impact Trump Media and Truth Social.
CNN reports that investors are cautioned about the risks associated with Trump Media's valuation. Matthew Kennedy, senior IPO strategist at Renaissance Capital, described the company as a "meme-SPAC" and warned that valuations tend to fall back on fundamentals over time.
Others, like CEO of Tuttle Capital Management Matthew Tuttle, advise extreme caution when trading Trump Media, citing its implied volatility as "insane."
Trump's history of bankruptcies also poses a risk to Trump Media. The company highlighted this risk in its SEC filings, noting that "there can be no assurances that TMTG will not also become bankrupt." Additionally, concerns arise about what will happen when lock-up restrictions on key insiders, including Trump, expire.
Despite these challenges, Trump Media's future may hinge on the outcome of the 2024 presidential election. With a potential second Trump term, Truth Social could become a primary means of presidential communication, further driving the company's success.
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