Trump’s Truth Social platform sees a $4 billion value drop in just one week

Former President Donald Trump’s nascent media venture is losing its luster among investors a week after going public, with a dramatic drop in the company’s stock price wiping $4 billion off its valuation.

The decline in Trump Media & Technology Group’s shares, which launched on the Nasdaq Composite Index on March 25 under the ticker “DJT” (after the former president’s initials), comes as the company acknowledged rising losses in a regulatory filing. The company also stated that its accountant had warned that its losses “raise substantial doubt about its ability to continue as a going concern.”

On Monday, shares of Trump Media & Technology Group, whose principal asset is the Truth Social platform, fell $13.30, or 21%, to $48.66. That is lower than its opening price of $49.90 per share last Monday and reflects a 39% drop from the stock’s high of $79.38 on March 26th.

Trump's Truth Social platform sees a $4 billion value drop in just one week

Nonetheless, the stock is higher than before a deal that brought Trump’s media company public last week. The shares had previously traded under the name Digital World Acquisition Corp., a dummy corporation created to take Truth Social public. Even with Monday’s fall, the stock had risen 178% this year.

Trump, who owns 57% of the newly public firm, has lost $2.5 billion — on paper — as a result of the stock market decline. His investment is currently valued at $3.8 billion, down from $6.3 billion at the stock’s top last week.

To be sure, Trump Media maintains a high market value for a company that is losing money and generated only $4.1 million in revenue last year. Even with Monday’s stock drop, the company is still valued $6.7 billion, more than Bausch & Lomb, Alcoa Corp., or Harley-Davidson, all of which generate billions of dollars in yearly revenue.

Trump Media’s skyrocketing valuation has generated comparisons with so-called “meme” stocks like GameStop, which often attract individual investors based on social media buzz rather than the tried-and-true yardsticks used by institutional investors, including as profitability and revenue growth.

Nonetheless, Truth Social has positioned itself as an alternative to more established internet behemoths like as Meta’s Facebook, which suffered losses in its early years.

“GameStop was the meme stock of a lifetime, but Trump Media has put it to shame,” said Michael Pachter, an analyst at Wedbush Securities, telling the Associated Press last week.

On Monday, Trump Media & Technology Group provided additional information regarding its finances. Last year, the company generated $4.1 million in revenue, up from $1.5 million the previous year. It also lost $58 million in 2023, compared to a $50 million profit in the previous year.

Furthermore, its accountant indicated that the company’s losses cast doubt on its capacity to continue operations. However, such a warning accurately reflects the company’s current status; the company might increase its user base, and revenue, and reverse its losses, placing it on a more stable path.

Trump has locked up his stake

Trump stands to collect billions of dollars from his controlling share in Truth Social’s parent firm, which comes at an ideal time for the former president given rising financial challenges.

Nonetheless, Trump is unable to access the stock, at least for the time being. That’s because Trump and other corporate officials are subject to a “lock-up” provision, which prevents them from selling the stock for at least six months. Such restrictions are prevalent in IPOs to prevent insiders from selling shares soon after a business goes public.

“Trump cannot sell his stock in the company for six months, making it difficult to translate Truth Social’s value into liquid cash that can be spent on the campaign,” analysts with the Europa Group wrote in a research. “That outlook could change over the coming months, particularly if Trump obtains the waiver or can find a lender willing to accept shares in Trump Media as collateral.”

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