Shares of Trump Media & Technology Group, the owner of Truth Social, have been rapidly declining. The stock dropped by another 10% on Monday, marking a brutal week that saw a third of its value wiped out. This sharp decline has reduced former President Donald Trump’s stake in the company to around $2.9 billion, down from a peak of $5.2 billion. Trump owns a dominant stake of 78.8 million shares in Trump Media, which finally went public in 2021 after years of delays due to regulatory and legal issues.
Experts had warned that Wall Street was overvaluing Trump Media, which was evident in the company’s financial performance. Last year, Trump Media reported a loss of $58 million on revenue of just $4.1 million, indicating significant challenges ahead. In comparison, Twitter generated more than 100 times as much revenue in the year before its IPO. Despite these concerns, Trump Media was valued at $11 billion after its first day of trading, nearly double the valuation of Reddit after its IPO, even though Reddit had significantly higher revenue.
The merger of Trump Media with a blank check company has seen the stock price more than double so far this year, despite the recent losses. However, the company’s fundamentals and financial performance suggest that the valuation may be disconnected from reality. With the significant drop in stock price and Trump’s stake shrinking to less than $3 billion, investors are likely reevaluating the company’s prospects and future potential. The rocky start to Trump Media’s public trading raises questions about the sustainability of the company and whether it can overcome its financial challenges.
The challenges facing Trump Media highlight the dangers of overvaluing companies, especially when their financial performance does not align with market expectations. The stock market can be volatile, and investors should exercise caution when assessing the worth of a company, especially one with limited revenue and significant losses. Trump Media’s struggles also serve as a cautionary tale for companies seeking to go public, emphasizing the importance of sound financial management and a strong business model to attract investors and sustain growth in the long term.
As Trump Media faces continued stock price declines and questions about its financial viability, the company will need to address its underlying issues to restore investor confidence. Whether it can overcome its current challenges and deliver on its promises remains to be seen. Trump’s significant stake in the company adds another layer of complexity to the situation, as his involvement may impact investor sentiment and the company’s reputation. Moving forward, Trump Media will need to focus on improving its financial performance and demonstrating its ability to generate revenue and profits to regain investor trust and support.
