As Donald Trump’s social media company begins trading publicly on Tuesday, potential investors may be wondering whether the stock is too expensive and possibly too volatile.
Trump Media & Technology Group Corp. was acquired Monday by a blank check company called Digital World Acquisition Corp. Trump Media, which operates the social media platform Truth Social, will now take Digital World’s place on the Nasdaq stock exchange.
Trump Media debuts with a stock price of nearly $50 and a market value of about $6.8 billion. Many of the investors in Digital World were small investors trying to support Trump or cash in on the mania, rather than large institutional and professional investors. These shareholders helped the shares more than double this year in anticipation of the merger going through.
They bet on a company that has not yet made a profit. Trump Media lost $49 million in the first nine months of last year, when it brought in just $3.4 million in revenue and had to pay $37.7 million in interest expenses. In a recent filing with the regulator, the company cited the high failure rate for new social media platforms, as well as the company’s expectation that it will lose money on its operations “in the near future,” as risks for investors.
Truth Social launched in February 2022, a year after Trump was banned from major social platforms, including Facebook and X, formerly Twitter, following the January 6 insurrection at the US Capitol. He has since recovered from both, but remains with Truth Social.
On Monday, Trump appeared in court in New York during a hearing for a criminal case involving hush money payments to cover up claims of marital infidelity. Afterwards, Trump told reporters that “Truth Social is doing very well. He is hot as a gun and doing great.”
However, Trump Media has not yet disclosed Truth Social’s user numbers – although that should change now that the company is public. Research firm Andereweb estimates that Truth Social had about 5 million active mobile and web users as of February. That’s well below TikTok’s more than 2 billion and Facebook’s 3 billion — but still higher than other “alt-tech” rivals like Parler, which has been offline for almost a year but is planning a comeback, or Gettr, which has less than had 2 million. visitors in February.
In addition to social media competition, Trump Media faces other risks – including to some extent Trump, who will have a nearly 60% ownership stake in the company.
Trump Media, based in Palm Beach, Florida, said in a regulatory filing that it is “heavily dependent on the popularity and presence of President Trump.” If the former president were to limit or end his relationship with the company for any reason, including his campaign to regain the presidency, the company would be “significantly disadvantaged.”
The company acknowledged Trump’s involvement in numerous legal proceedings and noted that “an adverse outcome in one or more” of the cases could adversely affect Trump Media and Truth Social.
Another risk, the company said, was that Trump, as a controlling shareholder, would have the right to vote his shares in his own interests, which may not always be in the interests of all shareholders overall.
If recent trading activity is any indication, investors may be in for a bumpy ride. Shares of Digital World have more than doubled this year ahead of a shareholder vote on its merger with Trump Media. After Friday’s vote, shares fell nearly 14%, but recovered strongly on Monday with a 35% gain.