The stock of Trump Media & Technology Group took a nosedive following reports of significant financial losses, resulting in a $1 billion reduction in the former president’s net worth, as per Bloomberg. Despite a recent surge that valued the company at $11 billion, concerns regarding its flagship product, Truth Social, losing users and draining finances had been voiced by experts.
Analogous to the meme stock frenzy during the pandemic, where companies like GameStop and AMC saw inflated stock prices despite underlying weaknesses in revenue, Trump Media shares experienced a surge driven by individual investors. This surge, propelling the stock nearly 200% higher this year, was interpreted by some as a show of support for the former president amidst his ongoing legal battles.
With a near 60% ownership stake, Trump stands to gain substantially when he can eventually sell his shares, though current legal constraints prevent him from doing so for the next six months without a board waiver. However, investors are betting on a company that admitted in a recent SEC filing that it anticipates continued operating losses and negative cash flows in the foreseeable future.
In 2023, Trump Media paid significant sums in interest expenses and operating losses, as revealed in financial filings. Management expressed doubt about the company’s ability to meet its financial obligations in a timely manner.
Truth Social, launched in 2022 after Trump’s ban from major social media platforms, has failed to attract a substantial user base, with estimates suggesting only about five million active monthly users, far fewer than its competitors. Although claiming around 8.9 million sign-ups, the company has refrained from disclosing key performance metrics, leaving shareholders in the dark about its operational viability.
