The social media company owned by former President Donald J. Trump, Truth Social, debuted on the Nasdaq with a market value of close to $8 billion, with Mr. Trump owning about 60 percent of the company, making him the largest shareholder. Investors who have bought shares in the company see it as a way to show support for Mr. Trump and his fight against Big Tech censorship, rather than as a traditional investment opportunity. The stock saw extreme volatility on its first day of trading, with trading briefly halted due to the frenzy. Many investors are individuals rather than investment firms or hedge funds, drawn in by their support for Mr. Trump and Truth Social.
Trump Media’s high valuation is unusual given its revenue and financial performance, with the company recording just $3.3 million in revenue and a $49 million loss for the first nine months of the previous year. By comparison, other social media companies like Reddit, Meta, and Snap trade at much lower price-to-sales ratios, and the company’s valuation is significantly higher than comparable tech stocks. Despite these numbers, investors on social media platforms show unwavering support for Mr. Trump and his company, with many viewing it as a long-term investment in the future of Truth Social.
The trading patterns of Trump Media resemble meme stocks like GameStop and AMC Entertainment, which saw surges in stock prices driven by amateur investors. While some investors are focused on the company’s valuation, many are more concerned with ensuring the success and viability of Truth Social. Big investors who have shorted Trump Media shares believe that the company’s price is unsustainable in the long term. The completion of the merger between Trump Media and Digital World coincided with Mr. Trump facing a legal deadline to secure a bond to cover a civil fraud case penalty. An appellate court reduced the amount Mr. Trump needed to post, easing the pressure on him to tap into his newfound wealth from Trump Media.
Mr. Trump’s ownership stake in Trump Media gives him significant control over the company, with the ability to influence major decisions. The soaring value of Trump Media’s shares serves as a political asset for Mr. Trump, allowing him to tout his business success and wealth on the campaign trail. The bigger challenge for Trump Media will be to develop a strategy to grow its business and expand the reach of Truth Social in order to justify its valuation. As a public company, Trump Media will face increased scrutiny from investors, regulators, and potential lawsuits, with the need to disclose detailed financial information and any deals struck with Mr. Trump. The company’s success will rely on its ability to differentiate itself in the competitive social media landscape and build on its ties to Mr. Trump’s base of supporters.
