Donald Trump’s Truth Social: A Roller Coaster Ride in the Stock Market

Posted: April 3, 2024

In a whirlwind of financial highs and lows, Donald Trump’s Truth Social has taken the stock market by storm, experiencing a significant drop in value and casting doubts on its future prospects. The once highly praised social media venture, owned by Trump Media & Technology Group, faced a staggering $1 billion decline in Trump’s stake value as its shares plunged by 21.5%.

The revelation that Truth Social made a significant loss of $58.2 million in the previous year, along with BF Borger’s, its auditor, disclosure of “substantial doubt” regarding its ongoing operations, has sent shockwaves through investors. Despite the initial market debut that valued the former US president’s stake at approximately $4.88 billion, the recent sell-off saw its worth decrease to around $3.83 billion.

The company’s revealed financial figures paint a picture of its struggle to establish a footing in the ever-competitive social media landscape. With sales of just $4.13 million in the previous year, Trump Media’s modest revenue increase in 2023 highlights its challenges in scaling up its operations while dealing with substantial losses.

The auditor’s warning about the company’s ability to continue as a “going concern” emphasizes the unstable nature of Truth Social’s financial standing. The company acknowledged that it is prone to heightened risks compared to other social media platforms due to its unique focus and the involvement of former President Trump.

Despite these financial and political challenges, Trump Media CEO Devin Nunes expressed optimism about Truth Social operating as a public entity, highlighting its lack of debt and a significant bank reserve of $200 million. The company’s merger with Digital World Acquisition and listing on the stock market boosted its valuation, turning it into a “meme stock” similar to other companies like the video games retailer GameStop.

As reported by Bloomberg, the merger ranked Donald Trump among the world’s 500 wealthiest people. However, John Rekenthaler, vice president for research at Morningstar, likened Trump Media to a cryptocurrency, suggesting that investors may be driven more by belief and affiliation rather than traditional metrics like cash flows, further contributing to its instability.

As for former President Trump, whose fortunes are tied intricately to the performance of his company Trump Media, the stakes are high. With his looming legal challenges and the desire to regain the most prominent position in the US government, Trump’s financial interests are closely dependent on the fate of Truth Social in the stock market.

Trump’s finances can keep afloat for the nearing elections and conquer every legal challenge his way. Financial losses would mean lesser legal funding, especially as he is bound to pay $454 million for a civil fraud case (although court judges provided him ten days to secure a $175 million bond).

As Truth Social navigates through these rough times, its current situation serves as a reminder of the volatile nature of emerging technological ventures and the influence of market sentiment on valuation.

Whether Donald Trump and Truth Social can prevail through these storms and emerge as competent players in the social media landscape remains uncertain. We can only wait to see how things will unfold for Trump and his company.