Trump Media’s shares drop 21% shortly after their launch

Trump Media shares plummet 21% days after debut

Donald Trump’s foray into the realm of social media faced a significant setback on Monday as shares of his company, Trump Media & Technology Group, plummeted by 21%. This dramatic decline effectively nullified the gains made during its debut just a week prior, following the disclosure of substantial losses and concerns over meeting future financial obligations.

According to filings, Trump Media & Technology Group reported a staggering loss of over $58 million in 2023, sending shockwaves through the market shortly after its high-profile blank-check merger led to its public introduction. The initial surge in stock value on March 26th, driven by enthusiastic retail investors, especially Trump supporters anticipating his potential presidential run in 2024, quickly reversed course with Monday’s revelation. Share prices nosedived by $13.30, amounting to a 21% drop, settling at $48.66.

Analysts weighed in on the situation, attributing the sharp decline to the company’s overvaluation and its unclear path to profitability. Ross Benes, an analyst at Insider Intelligence, remarked, “Truth Social was overvalued and that reality is dragging down the stock. Because the service does not have a clear path to profitability and its revenues are meager, its high debut was unsustainable.”

Trump Media's shares drop 21% shortly after their launch
Trump Media’s shares drop 21% shortly after their launch (Credits: News and Sentinel)

Despite the setback, Trump, with 78.75 million shares in his possession, stands to potentially gain substantially, depending on the stock’s value. At its peak last week, his stake would have been valued at over $6 billion, but with the recent sell-off, it now hovers around $3.8 billion. However, Trump is subject to a six-month restriction on selling or leveraging his shares, with any attempt to alter this agreement likely triggering further selling.

Nevertheless, Trump Media & Technology Group still boasts a market value exceeding $6 billion, albeit falling short of the $8 billion market capitalization of social media giant Reddit. Analysts such as Michael Ashley Schulman of Running Point Capital note that despite its initial hype, Trump’s social media venture has a long way to go before posing a significant challenge to established platforms like Twitter, Instagram, and TikTok.

Revenue figures further underscore the company’s struggles, with Truth Social reporting a modest $4.13 million in revenue for 2023, a slight improvement from $1.47 million in the previous year. In comparison, Reddit raked in a staggering $800 million in revenue for the same period, boasting a user base of 73 million active users, whereas Truth Social only discloses its total number of sign-ups, which stands at 8.9 million.

The company’s financial woes are compounded by its legal battles, notably with co-founders Wesley Moss and Andrew Litinsky. A Delaware judge has called for a hearing this month to address their claims to an 8.6% stake in the company, amidst accusations of improper dilution by Trump Media and counterclaims of unearned shares by the co-founders.

Trump Media & Technology Group stands at a critical juncture, confronting financial instability, legal wrangles, and the formidable endeavor of cementing its credibility in the fiercely competitive social media sphere.