Experts warn Donald Trump’s stock is essentially just a meme

A merger allowed for Donald Trump's media company to go public.

A merger allowed for Donald Trump's media company to go public. Photo: Getty

Part of Donald Trump’s business empire just went public, and when the market closed, his company was valued at $US8 billion, but experts have some burning questions.

Publicly traded shell company Digital World Acquisition Corp merged with Trump’s media business this week, allowing for Truth Social to begin trading on the Nasdaq stockmarket under ‘DJT’, or Trump’s initials.

Digital World and the newly listed Trump Media & Technology Group (TMTG) have together surged almost 600 per cent since the deal was announced, cementing TMTG’s status as one of Wall Street’s so-called meme stocks popular among retail traders and whose movement can be driven by posts on social media.

TMTG made its Nasdaq debut, enjoying a session high of $US79.38 a share on an undiluted basis.

The stock closed at $US57.99, valuing the company at close to $US8 billion.

Part of that company is Truth Social, the platform that came to be when the former president was booted from Twitter (now known as X) and Meta’s offerings.

Truth Social capitalised on his ban from other social media platforms and his loyal supporters certainly flocked to it, but it hasn’t been an overwhelming success.

Last year, TMTG reported an operating loss of $US10.6 million for the first nine months of 2023 on revenue of just $US3.4 million.

Truth Social is relatively small, especially when compared to other social media companies.

According to the Associated Press, it had about five million active users in February, whereas TikTok has more than two billion and Facebook has in excess of three billion.

‘Divorced from fundamentals’

Finance professor at the University of Florida, Jay Ritter, told CNN the whole evaluation was “very unusual” as the stock was “pretty much divorced from fundamentals”.

“The underlying business doesn’t seem to be worth much. There is no evidence this is going to become a large, highly profitable company,” he said.

“I’m reasonably confident the stock price will eventually drop to $2 a share and could even go below that if the company blows through the money it got from the merger.”

NEW YORK, NY - MARCH 25: Donald Trump is seen on March 25, 2024 in New York City. (Photo by Andrea Renault/Star Max/GC Images)

Trump Media & Technology Group went public on Tuesday. Photo: Getty

The stock price has been compared to the meme stock beneficiaries, like GameStop and AMC Entertainment in 2021.

“Like any meme stock or fad, as long as there’s a greater fool to buy you out for what you paid for it, then you can continue to prosper,” Brian Dunn, the director of the Institute for Compensation Studies at Cornell University told the Associated Press.

Apparently, when Trump’s stock went public, Truth Social was buzzing with tips on how to procure it, AP reported.

Trump’s supporters wanted DJT stock to pass $100 per share to “drive liberals insane”.

“Get yourself a piece of #DJT stock if your [sic] a true MAGA supporter,” one Truth Social user apparently said.

What will Trump do with his stock?

I LOVE TRUTH SOCIAL, I LOVE THE TRUTH!” Trump wrote on the platform on Tuesday, local time.

Trump’s majority stake in TMTG was last valued about $US6 billion, although lock-up restrictions for six months could prevent him selling or borrowing against his shareholding.

Lock-up restrictions will likely prevent Trump from selling or borrowing against those shares in the near future, CNN reported.

As many people have pointed out, Trump Media is greatly intertwined with Trump.

Not only is he hoping to become president again, but he is facing four criminal charges and he has struggled to raise money for his campaign and legal expenses.

Digital World said in a filing in February that Trump might divest his stake in Truth Social and cease any involvement in its management based on how his bid for president went.

Stay informed, daily
A FREE subscription to The New Daily arrives every morning and evening.
The New Daily is a trusted source of national news and information and is provided free for all Australians. Read our editorial charter
Copyright © 2024 The New Daily.
All rights reserved.