Trump Media & Technology Group, the owner of Truth Social, is going public with an eye-popping valuation of $9 billion, despite the platform’s struggles and financial losses. Shares of Digital World Acquisition Corp., which will become Trump Media, have surged nearly 200% this year, leading to concerns about its fundamentals and market valuation. Some experts believe that the stock price is vastly overvalued and could eventually plummet back to its true value of around $2 per share.
While Trump Media is valued at $9 billion, it only generated $3.4 million in revenue in the first nine months of last year and posted losses of $49 million. Truth Social, the company’s main product, has experienced a decline in users and is still dwarfed by competitors like X and Facebook. Despite these challenges, the market continues to assign a high valuation to Trump Media, leading to comparisons to meme stocks like GameStop and AMC that saw sharp increases in value during the pandemic.
There are risks associated with investing in Trump Media, including the company’s heavy reliance on Donald Trump, who faces legal challenges and a history of bankruptcies with his previous businesses. Key insider lock-up restrictions could also impact the company’s share price when they are lifted. Additionally, Truth Social needs to focus on growing its user base, expanding its advertising business, and building a subscription service in a polarizing political environment where the Trump movement is viewed with skepticism.
Trump Media’s future success may hinge on a potential second term for Trump in the White House, with the platform potentially becoming a primary means of presidential communication. However, the company’s valuation remains disconnected from its financial performance, leading experts to caution against investing in the stock. Despite the risks, some investors are betting on Trump Media’s potential for growth, while others advise extreme caution due to the high levels of implied volatility associated with the company. Ultimately, the future of Trump Media as a publicly traded company remains uncertain, with market dynamics and Trump’s legal challenges influencing its trajectory in the coming months.
