Former President Donald Trump’s social media company, Trump Media & Technology Group Corp., saw its shares rise about 16% on its first day of trading on the Nasdaq. The merger with Digital World Acquisition Corp. has boosted the company’s value to $7.85 billion, with Trump holding a 60% ownership stake worth around $4.6 billion. Many small-time investors have invested in Trump Media, either to show support for Trump or to capitalize on the excitement surrounding the company.
Since its launch in February 2022, Truth Social, the social media platform run by Trump Media, has garnered attention from users seeking to show their support for Trump through investing in the company. User posts on Truth Social indicate a strong emphasis on promoting the company’s stock and driving up its value, particularly among conservative users. Trump Media CEO Devin Nunes has expressed a commitment to reclaiming the internet from censorship by Big Tech through the company’s advocacy efforts. However, investors should be cautious as the company’s profitability remains uncertain, with significant losses reported in its operations.
While Truth Social has attracted roughly 5 million active users in February, it lags far behind larger social media platforms like TikTok and Facebook. The company’s decision not to focus on short-term metrics like average revenue per user or active user accounts may pose challenges in competing with more established platforms. Analysts have expressed concerns about Trump Media’s long-term viability and the potential for a steep decline in its stock value if its user base fails to grow significantly. The company’s reliance on Trump’s popularity and presence also presents risks, as any negative developments in his legal proceedings or political ambitions could impact the company negatively.
Trump has remained optimistic about Truth Social’s prospects, touting its success in the market and expressing his love for the platform. However, the company’s dependence on Trump’s continued involvement raises concerns about potential disruptions if his relationship with the company changes. As a controlling stockholder, Trump’s voting power could influence decisions that may not align with the interests of other shareholders. Small investors who have rushed to buy into Trump Media shares are cautioned to be mindful of the risks associated with meme stock phenomena, where the value of shares can be affected by speculative trading behaviors. The future of Trump Media and Truth Social remains uncertain, and investors should approach their investments with caution.
