Trump Media & Technology Group’s stock has been incredibly volatile since becoming public two weeks ago, with dramatic spikes and crashes in share price leading to significant fluctuations in former President Donald Trump’s net worth, resulting in a $2 billion drop since going public. The extreme turbulence of the stock is largely due to its connection to Trump, attracting attention from retail investors, professional traders, and the media. Trump Media’s stock has been moving up or down by at least 5% each day, with more than half of the days seeing double-digit percentage movements.
The stock’s volatility is primarily attributed to its inflated valuation that experts believe defies logic. Despite significant losses in users and revenue, Trump Media was valued at $11 billion when it started trading, far surpassing its peers in terms of market valuation. Trump Media’s stock has little support due to its minimal revenue, making it vulnerable to sharp declines. Additionally, the shareholder base likely consists of many momentum traders, exacerbating market moves triggered by negative news or lack thereof.
Companies that go public like Trump Media tend to experience initial volatility due to lack of trading history and lock-up restrictions on shares held by insiders. Trump Media’s stock is further influenced by the fact that only a small number of shares are available for trading, making it difficult for skeptics to bet against it. High borrowing rates have made it nearly impossible to short the stock, driving up demand for bullish bets that further increase share prices. The lack of a normal check on overvalued stock prices has allowed Trump Media’s stock to soar.
The link between Trump and the company has intensified market speculation surrounding Trump Media, with the stock becoming a vehicle for investors to bet on Trump’s political fortunes. People’s sentiments towards the former president are influencing their decisions to either bet for or against the stock, creating a divide in the market. Trump supporters see the stock as a rising balloon that will not fall, while more sophisticated investors are anticipating a quick return to reality. The polarizing nature and political association of Trump with the company are fueling debates and contributing to the tug-of-war in the marketplace.
Overall, Trump Media’s stock has experienced extreme volatility due to its connection with the former president, inflated valuation, and limited availability of shares for trading. The speculative nature of the stock, driven by sentiments towards Trump and market dynamics, has resulted in significant fluctuations in share prices and challenges for investors looking to bet against the company. The unpredictable nature of Trump Media’s stock price has created a rollercoaster ride for shareholders, making it a risky investment opportunity for both retail and professional investors.
