Trump Media Shares Plummet 21% Days After Debut – Donald Trump’s social media company saw a drastic 21% decline in its shares on Monday, erasing the gains made during its debut last week. This plunge came after the company disclosed significant losses amounting to millions and admitted to potential financial struggles ahead.
According to filings, Trump Media & Technology Group reported a loss exceeding $58 million in 2023, prompting a sharp downturn in share value less than a week after its high-profile public introduction via a blank-check merger under Truth Social’s umbrella.
Initially, the stock had soared during its March 26 launch, closing at nearly $58 per share, buoyed by retail buyer enthusiasm, including supporters of Trump, who is anticipated to be the Republican nominee in the upcoming 2024 presidential election. However, Monday’s revelations reversed this trajectory, causing shares to plummet by $13.30, equivalent to 21%, settling at $48.66.
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“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,” said Ross Benes, analyst at Insider Intelligence. Trump’s ownership comprises 78.75 million shares, potentially leading to significant gains for the former president, contingent upon their valuation.
At the stock’s zenith last week, his shareholding would have surpassed $6 billion; however, following the recent sell-off, its appraisal hovers around $3.8 billion. Trump is bound by a six-month restriction preventing him from selling or leveraging any of his shares. Any attempt by him to modify this agreement is likely to prompt further divestment.
Despite the stock’s downturn, its market capitalization still exceeds $6 billion, in contrast to the social media platform Reddit’s valuation of $8 billion. “TMTG enjoyed a huge run-up on hype and enthusiasm, but it is a long way off from becoming a true scaled social media challenger to X (Twitter), Instagram, TikTok and other platforms,” said Michael Ashley Schulman, analyst at Running Point Capital.
According to its statement, Truth Social reported a revenue of $4.13 million last year, a notable increase from $1.47 million in 2022. In contrast, Reddit generated $800 million in revenue in 2023. Reddit boasts 73 million active users, while Truth Social only reveals its total sign-up count, which stands at 8.9 million. In its filing on Monday, TMTG indicated it has no intention of disclosing fundamental metrics typically shared by comparable companies.
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“As of December 31, 2023 and 2022, management has substantial doubt that TMTG will have sufficient funds to meet its liabilities as they fall due, including liabilities related to promissory notes previously issued by TMTG,” the company said. Trump Media is currently entangled in a legal dispute with its co-founders, Wesley Moss and Andrew Litinsky.
A Delaware judge expressed a desire on Monday for the parties to arrange a hearing date this month to ascertain whether the duo should be granted the 8.6% stake in the company they assert they are entitled to. Legal actions have been initiated by both Trump Media and the co-founders in Delaware and Florida state courts. Moss and Litinsky allege that Trump Media sought to unfairly diminish their ownership stake, while the company contends that they did not fulfill the requirements to acquire their shares and aims to revoke their ownership rights.
