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Tuesday, May 28, 2024

Trump’s Truth Social Stock Nearly Doubles in Value after Going Public

'Truth Social is doing very well. It’s hot as a pistol and doing great...'

Editor’s note: In the interest of full disclosure, the editor of this piece recently invested in four shares of DWAC (now DJT) stock. Much of the report is drawn from the Associated Press, with some supplementary comments from Headline USA to add additional context.

(Headline USA) On its first day as a public company, Trump Media & Technology Group Corp. soared to an increase of about 30% up from its initial public offering.

Following its merger with Digital World Acquisition Corp. on Monday, Trump Media, which runs the social media platform Truth Social, now takes DWAC’s place on the Nasdaq stock exchange using the letters DJT as its trade symbol.

As of Tuesday morning, the stock opened around $70, nearly double what it was last Thursday, which potentially added billions in value to the GOP presidential frontrunner’s net worth as supporters flocked to the market to show their solidarity.

Even neutral investors took note after a favorable verdict in Trump’s nearly half-a-billion-dollar New York civil penalty was reduced on Monday by an appeals court, reducing the likelihood that the former Manhattan mogul would need to cash out his shares to pay corrupt Attorney General Letitia James and Superiour Court Judge Arthur Engoron—who had previously threatened to begin seizing his real-estate assets.

Left-wing media critics suggested that the buyup resembled a so-called meme stock, where buzz triggered a huge run on a novelty asset, but the underlying financial stability ultimately would lead to a course adjustment resulting in sizable losses for those who bought in at peak and sold it too late.

However, Trump’s loyal supporters no doubt were undeterred by the prospect of losses, seeing it as a way to donate in support of his spurious lawfare attacks while circumventing normal campaign-finance rules.

The prospect of mutual financial benefit only sweetened the pot, evoking for many the halcyon days of Trump’s presidency pre-COVID, when his stewardship helped bring prosperity to many, filling 401(k) coffers to the brim.

DJT debuted on Monday with a stock price near $50 and a market value of about $6.8 billion befure rising even further throughout the course of the day.

Many of Digital World’s investors were small-time investors either trying to support Trump or aiming to cash in on the mania, instead of big institutional and professional investors. Those shareholders helped the stock more than double this year in anticipation of the merger going through.

They’re betting on a company that has yet to turn 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 regulatory filing, the company cited the high rate of failure for new social media platforms, as well as the company’s expectation that it will lose money on its operations “for the foreseeable future” as risks for investors.

Truth Social launched in February 2022, one year after Trump was banned from major social platforms including Facebook and Twitter. He’s since been reinstated to both but has stuck with Truth Social.

On Monday, Trump appeared in court in New York at hearing for a criminal case involving hush money payments made to cover up claims of marital infidelity. Afterwards, Trump told reporters that “Truth Social is doing very well. It’s hot as a pistol and doing great.”

Trump Media has yet to disclose Truth Social’s user numbers—although that should change now that the company is public.

Research firm Similarweb estimates that Truth Social had roughly 5 million active mobile and web users in February. That’s far 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 nearly a year but is planning a comeback, or Gettr, which had less than 2 million visitors in February.

Trump recently signaled his opposition to a proposed ban on TikTok, saying that it would only assist Facebook. But it is possible that he was concerned also about the ban empowering President Joe Biden to impose new arbitrary regulations on his own platform.

Besides competition in the social media field, Trump Media faces other risks—including to some degree Trump, who will have a nearly 60% ownership stake in the company.

Trump Media, which is based in Palm Beach, Florida, said in a regulatory filing that it “is highly dependent on the popularity and presence of President Trump.”

If the former president were to limit or discontinue his relationship with the company for any reason, including due to his campaign to regain the presidency, the company “would be significantly disadvantaged.”

Acknowledging Trump’s involvement in numerous legal proceedings, the company noted that “an adverse outcome in one or more” of the cases could negatively affect Trump Media and Truth Social.

Another risk, the company said, was that as a controlling stockholder, Trump would be entitled to vote his shares in his own interest, which may not always be in the interests of all the shareholders generally.

If recent trading activity is any indication, investors could be in for a bumpy ride. Digital World shares more than doubled this year ahead of a shareholder vote on the merger with Trump Media. After the vote Friday, shares dropped almost 14%, but Monday they rebounded strongly with a gain of 35%.

Adapted from reporting by the Associated Press

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