In a dramatic turn of events, Truth Social, the social media company spearheaded by former President Donald Trump, has seen its stock price plummet, triggering a wave of investor lawsuits and highlighting a stark disconnect between the company’s market valuation and its financial health.
The stock, trading under the ticker DJT for Donald Trump’s initials, has experienced a precipitous decline, shedding over 21% of its value shortly after its public debut—a debut that initially set the company’s market value at an astounding $8 billion. This plunge in stock price has subsequently eroded the value of Trump’s 57 percent ownership in the company by roughly $1 billion, down to $3.8 billion.
Trump Media and Technology Group, the entity behind Truth Social, disclosed a loss of more than $58 million last year, according to a filing with the Securities and Exchange Commission. These losses draw a grim picture of the company’s viability, considering it generated just over $4 million in revenue last year, including less than $1 million in the last quarter.
The financial community’s sentiment toward the stock has been skeptical at best. Jay Ritter, a finance professor at the University of Florida, confidently predicted that the stock price is “eventually drop to $2 a share and could even go below that,” citing that Truth Social’s business model is “not conducive to profit.” Ritter’s outlook is echoed by investors betting against the stock. Ihor Dusaniwsky, managing director of predictive analytics at S3 Partners, noted that short sellers are paying costs of 565% annually, based on the belief that the share price is due for a dramatic fall.
Amidst this turmoil, Trump Media’s board could consider waiving the requirement that bars Trump from selling or using his shares as collateral for a loan for six months, but such a move could further damage investor confidence and the stock price.
Investors who bought into the stock are beginning to reckon with the reality of their investments. Some, who took advantage of early surges in price, were able to profit by selling at the peak. However, as one investor recounted, they purchased shares at $35, waited for Trump’s fan base to drive up the stock, and then offloaded it—a classic example of a “pump and dump” strategy.
Now, lawsuits are beginning to surface against Trump Media, Digital World, and its co-founders, Andy Litinsky and Wes Moss, among others, involving claims of mismanagement and improper share dilution. These legal battles are adding a layer of complexity to an already convoluted situation, promising a “costly and time-consuming” process that could further tarnish the company’s reputation.
Trump Media has begun testing “state-of-the-art technology that supports video streaming and provides a ‘home’ for canceled content creators” and aims to attract content creators who have been de-platformed elsewhere, but the company has not provided key performance indicators .
Relevant articles:
– Evicted, arrested and being sued by the boss: When will MAGA learn loyalty to Trump ends in sorrow?
– Trump Media is the most expensive U.S. stock to short — by far, CNBC, Wed, 03 Apr 2024 23:12:21 GMT
– Trump Media stock plunges as 2023 Truth Social loss put at $58 million, The Washington Post, Mon, 01 Apr 2024 17:35:00 GMT
– Trump poised for billions as stock market deal passes, Yahoo New Zealand News, Thu, 04 Apr 2024 03:05:27 GMT