Trump Media & Technology Group had a high-flying debut on the Nasdaq stock exchange, with trading briefly halted due to extreme volatility. Former President Donald J. Trump, the company’s largest shareholder with a 60 percent stake, saw his ownership valued at about $4.6 billion after the first day of trading. The company’s market value reached nearly $8 billion, surpassing companies like Mattel, Alaska Airlines, and Western Union, despite only making $3 million over most of last year.
Trump Media’s valuation is significantly high compared to other social media companies, with its market value almost 2,000 times its estimated annual revenue. The company’s main asset is Truth Social, a digital platform created as an alternative to Twitter, where Mr. Trump communicates with his supporters and critics. Despite operating at a loss, investors justify the high valuation based on expected growth or the belief that others will continue bidding up shares. However, other social media companies like Reddit, Meta, and Snap trade at much lower price-to-sales ratios.
Truth Social, with 10 million downloads since its launch in early 2022, is a small player in the social media world. Mr. Trump has 6.5 million followers on the platform, compared to his previous 87 million followers on Twitter before his account was suspended. The objective behind Trump Media & Technology Group was conceived in early 2021 by former “Apprentice” contestants Andy Litinsky and Wes Moss, aiming to create a conservative media giant centered around Mr. Trump after his suspension from Twitter post-January 6 Capitol attack. Truth Social was introduced in 2022 as the primary communication hub for Mr. Trump.
Trump Media ultimately went public by merging with a special purpose acquisition company (SPAC), Digital World Acquisition Corporation, after certain delays. Individual investors, rather than institutions, are the primary buyers of Trump Media’s shares, showing support for Mr. Trump and an alternative social media platform. Many investors see their purchase as a way to stand for free speech, believing the platform is not heavily influenced by the government. Despite the financial gains, some shareholders emphasize their investment as support for Truth Social and Mr. Trump.
The merger agreement between Trump Media and Digital World includes restrictions preventing major shareholders from selling shares for at least six months or using them for loans. However, given Mr. Trump’s control over the company and the likelihood of his allies making up the majority of the board, these restrictions could be waived on his request. If Mr. Trump decides to sell some of his shares, it may impact the share price and hinder further growth. While Trump Media has increased Mr. Trump’s wealth on paper, utilizing these funds for his legal issues may not be straightforward.
