Trump Media Shares are in Free Fall
Truth Social’s parent company, Trump Media & Technology Group, has seen a dramatic decline in its market value. The conservative social media company has experienced a staggering 50% drop in its share price (DJT) since May 30, the day former President Donald Trump was convicted of 34 felony counts in a hush money trial. The share price fell another 5% on Friday, contributing to this significant decline.
This sharp selloff has led to a nearly $3 billion reduction in Trump’s estimated net worth, as he is the company’s leading shareholder and chairman.
The downturn in Trump Media’s stock accelerated after the company announced it had received regulatory approval for a move that could dilute existing shareholders’ holdings. This announcement, combined with the company’s already volatile share price, has raised concerns among investors and experts about the future stability of Trump Media.
Jay Ritter, a finance professor at the University of Florida, expressed scepticism about the company’s current valuation. “The stock is still wildly overpriced,” Ritter said, highlighting that despite being valued in the billions, Trump Media generates minimal revenue. In the first quarter, the company reported revenue of just $770,500, marking the second consecutive quarter of sub-$1 million revenue. Truth Social, the company’s social media platform, remains a minor player compared to giants like Elon Musk’s X (formerly Twitter), Reddit, and Instagram’s Threads.
Matthew Kennedy, a senior IPO market strategist at Renaissance Capital, echoed Ritter’s concerns. “This is a development-stage company with a multi-billion-dollar valuation,” Kennedy noted, comparing Trump Media to meme stocks like GameStop and AMC that trade on momentum and hype rather than financial fundamentals.
Despite the severe selloff, Trump Media’s CEO Devin Nunes remains optimistic. He announced that the company’s S-1 registration statement had been approved by the Securities and Exchange Commission, allowing early investors to exercise warrants and buy more shares. This move could raise nearly $250 million for the company, which it plans to use for building its ad platform or acquiring smaller firms.
However, the exercising of these warrants will likely dilute existing shareholders’ holdings by increasing the supply of shares. Trump Media can issue 21.5 million additional shares, further impacting the share price.
Ritter emphasized that the price of such stocks is determined by supply and demand, which is especially true for meme stocks trading above their fundamental value.
Trump, who owns 114.75 million shares or nearly 65% of the company, has seen his stake’s value drop from $6 billion to about $3.1 billion since May 30. His shares, which cannot be sold in the near term, have been significantly impacted by the recent downturn.
As Trump Media navigates these financial and legal challenges, its future remains uncertain, with experts warning of potential further losses.
