The Donald Trump-tied media company behind Truth Social sparked frenzied trading in its public debut Tuesday — but it surely bears all the hallmarks of infamous “meme stocks” given the actual state of its business, finance experts told The Post
Truth Media & Technology Group surged nearly 60%, to almost $80 a share, shortly after the opening bell, but a late-day selloff pushed the stock right down to $57.99 at the close, to complete with a 16% increase.
The volatility drew immediate comparisons to the infamous “Reddit rally,” where retail investors bought stock in struggling firms like GameStop and AMC to squeeze short-sellers
“It definitely is the latest meme stock, but it surely differs from three years ago, when AMC and GameStop shot up in price after which collapsed,” said Jay Ritter, a University of Florida finance professor and expert on IPOs.
“Here, I don’t think buyers are trying to punish short sellers,” Ritter continued. “I feel the buyers are mainly Trump supporters attempting to display loyalty. It’s ideologically motivated – although you possibly can also say punishing short-sellers was ideologically motivated in that regard.”
At its session high of $79.38 per share, TMTG’s market capitalization crossed $10 billion on an undiluted basis, an astronomical valuation for an organization that reported an operating lack of $10.6 million for the first nine months of 2023 on revenue of just $3.4 million. The worth fell to roughly $8 billion after the sell-off.
The corporate also admitted that it “expects to incur operating losses for the foreseeable future” while constructing out its business, a recent SEC filing.
“It’s untethered from fundamentals. It’s a PR gambit,” said David Kaufman, an IPO expert and partner at Thompson Coburn.
“Typically, corporations trade based on fundamentals. I feel eventually, most corporations revert to trading on fundamentals.”
“There probably are a variety of individuals who view this as a method to support Trump,” Kaufman added.
The stock’s Nasdaq debut under the “DJT” ticker proved a timely windfall for Trump, who owns nearly 79 million shares of the company.
Trump’s fortune was valued at $6.5 billion even before Tuesday’s opening bell, in line with the Bloomberg Billionaires Index.
Nonetheless, Truth Social had an estimated base of just 494,000 monthly energetic users for its mobile app in February, in line with data compiled by analytics firm Similarweb.
The number represented a 51% decline in comparison with the same month one yr ago.
It’s also a fraction of the US mobile users for more well-established social media apps resembling Facebook (142.4 million users), X (75 million users) and even Meta-owned Threads (7.2 million).
“We built this company to guard the American people’s voices and their freedom,” a spokesperson for Truth Social told The Post after the market closed.
“Having transformed right into a public company, Truth Social stays committed to maintaining and vehemently defending a digital space free of charge expression.”
Ritter said the company has displayed “no obvious growth” thus far and has had “difficulty getting additional paying subscribers, paying existing paying subscribers and attracting advertisers.”
“Given the undeniable fact that the operating business hasn’t demonstrated any ability to generate income, I’m hard-pressed to think about a scenario where the stock is value way more than $2 per share,” Ritter said.
“The one query is how soon does it drop from $70 to $2. It would take weeks, it would take months, it would take years.”
The corporate’s public debut via SPAC merger added some $300 million in money to its balance sheet, which translates to roughly $2 per share.
Under the terms of the go-public deal, Trump and other major shareholders are unable to sell shares in the company for six months.
Consequently, the ex-president will only have the opportunity to bypass the six-month “lock-up” period if he obtains a waiver from the company’s board of directors.
Even when such a waiver was granted, it could likely tank the company’s stock price – especially if Trump tried to unload a significant chunk of his holdings directly, in line with Ritter.
Meaning Trump won’t likely have the opportunity to tap his newfound riches as he faces a mounting legal tab for various courtroom battles.
On Monday, Trump said he would make a $175 million bond payment in connection to his civil fraud case after a Recent York state appeals court agreed to carry off collection of an original judgment of $454 million.
He has 10 days to make the payment.