Shares of Trump's Social Media Company See Steep Decline
Donald Trump's social media venture, Trump Media & Technology Group (TMTG), faced a turbulent market day with its shares plummeting 21%. This unexpected downturn eradicated the gains it had amassed upon its high-profile debut, revealing underlying financial strains, including substantial losses amounting to over $58 million in 2023. The Truth Social platform, despite initial excitement and a soaring stock value during its public introduction, encountered a major setback following a disclosure that cast doubt on its financial sustainability.
Financial analysts have expressed skepticism about Truth Social's valuations and viability. With a lack of a clear strategy for profitability and minimal revenues, the overwhelming enthusiasm that greeted its stock market entry has waned. "Truth Social was overvalued, and the service's unclear path to profitability and meager revenues made its high debut unsustainable," explained Ross Benes, an analyst at Insider Intelligence.
Significantly, Donald Trump, holding 78.75 million shares, witnessed a drastic fluctuation in the value of his stake, from more than $6 billion at the stock's peak to roughly $3.8 billion after the sell-off. Despite these challenges, TMTG's market valuation remains high, juxtaposed with other social media giants, and notably above $6 billion.
Analysts like Michael Ashley Schulman of Running Point Capital remarked on the hype surrounding TMTG's launch but cautioned about the company's journey towards becoming a formidable challenger in the social media landscape against platforms such as X (formerly Twitter), Instagram, and TikTok.
Moreover, short sellers found an opportunity amidst TMTG's tumult, recuperating a significant portion of their yearly losses. This selloff generated a $65 million on-paper gain for these investors, softening their annual deficit to $126 million, as reported by S3 Partners.
Despite its ambitious beginnings, Truth Social reported a revenue of $4.13 million for the previous year, a figure that pales in comparison to Reddit's $800 million in the same timeframe. Additionally, while Reddit boasts 73 million active users, Truth Social has not disclosed comparable user metrics, opting instead to reveal a sign-up tally of 8.9 million. This reticence extends to other commonly reported data by similar entities, raising questions about the platform's transparency and future strategy.
Complicating matters is an ongoing legal battle between Trump Media and its co-founders, Wesley Moss and Andrew Litinsky, over an alleged 8.6% stake in the company. With lawsuits filed in both Delaware and Florida state courts, this legal entanglement adds another layer of uncertainty to TMTG's path forward.
As the landscape of the social media sector evolves, investors and observers alike watch closely to see how Trump Media & Technology Group navigates its financial challenges, market position, and legal hurdles in the pursuit of becoming a significant player in the industry.
Analyst comment
Negative news.
As an analyst, the market is likely to continue to view Trump Media & Technology Group (TMTG) with skepticism due to its financial strains, lack of clear profitability strategy, and minimal revenues. The decline in share value and legal battles further add to the uncertainty surrounding the company. TMTG will face challenges in establishing itself as a formidable competitor in the social media landscape against established platforms like X, Instagram, and TikTok.
