Trump Media Stock Surges 24 Percent in First Week of Trading

President Trump’s stake in the company is now valued at $4.87 billion, and owning the stock is perceived as lending support to the former president.

Republican presidential hopeful and former US President Donald Trump looks on, flanked by son Eric Trump (L) and daughter-in-law Lara Trump, during an Election Night Party in Nashua, N.H., on Jan. 23, 2024. 

The stock performance of Trump Media & Technology Group (TMTG) blew past expectations as shares surged by more than 24 percent in its first week of trading after going public.

TMTG, the parent company of Truth Social, started trading under the ticker symbol DJT on NASDAQ starting Tuesday after earlier merging with Digital World Acquisition Corp. (DWAC). Shares of DWAC traded at $49.95 on Monday’s close. By the end of the week on Thursday, TMTG was trading at $61.96, up by over 24 percent. The stock market remained closed on Friday due to Easter.

President Trump holds 78.75 million shares in the company. At $61.96 per share, the former president’s stake in TMTG is now worth $4.87 billion, while TMTG’s market capitalization is at $8.39 billion. According to the Bloomberg Billionaires Index, President Trump’s net worth was at $7.48 billion as of March 30. He ranked at the 350th spot in the list of the world’s 500 richest people.

The performance of the stock has exceeded expectations as experts predicted shares to perform negatively. Some pointed out that TMTG has not made a profit. The firm only made $3.3 million in revenues between January and September 2023. During this period, it registered losses worth $49 million.

If the $3.3 million Jan.-Sept. revenue is estimated for the entire 2023, the $8.3 billion valuation would be around 2,500 times the company’s annual revenue, making the stock highly overvalued.

“The valuation of the company should be several hundred million, not the billions it is currently valued at,” University of Florida professor Jay Ritter told USA Today while predicting TMTG stock to bottom out at $2 per share.

“The stock will continue to be very volatile, with sharp moves up and down. But the long-term trend will be down … The company has about $2 in cash per share, but it will probably burn through that money and the most likely outcome is eventual bankruptcy.”

However, not everyone thinks TMTG’s valuation is something that will crash soon. TMTG is seen as a meme stock—virally popular shares due to the high social sentiment attached to them.

In an interview with The Hill, Thomas Hayes, chairman and managing member of Great Hill Capital, pointed out that meme stocks are “no longer really investment decisions in the way that you think about the price-earnings ratio, discounted cash flow.”

“All the things that people use to value a company become somewhat irrelevant. Because it’s about faith. It’s about being part of something bigger.”

In the case of TMTG, the focus is on supporting President Trump, Mr. Hayes stated. “If you’re 30 or 40 or 50 percent of the country that wants to support Donald Trump, there’s no more effective way to do that than to buy shares in this company and hold those shares until the election period.”

While some may look to short TMTG stock, believing it to be overvalued, Mr. Hayes advised against it, calling it a “bad move” since the investors have “shown that they are loyal through thick and thin.”

“As much as the value of the business is detached from the price that it’s trading at in the market, do not underestimate the ability for more support and consistent support for as long as Trump needs it from his supporters.”

Profitability and Faith

Speaking to USA Today, Brent Goldfarb, a professor at the University of Maryland’s business school, said he doesn’t see any “path to profitability” for TMTG. The only way the company can justify its market valuation “is to imagine some sort of immense growth in the platform.”

Trump supporters are backing the venture. Teri Lynn Roberson, 52, Texas, bought five shares of TMTG at $72, saying she does not care about the business’s fundamentals. “It’s mainly to support Trump and his legal battles,” Ms. Roberson said.

President Trump is due to post a $175 million bond in the New York civil case that accuses him of inflating the value of his assets.

On Tuesday, the first day of its trading, TMTG was among the 15-most traded stocks in terms of volume at trading platform Interactive Brokers.

“We’re seeing a lot of flow,” Steve Sosnick, chief strategist at Interactive Brokers, told Financial Times. “Our customers are typically drawn to high volume, high volatility, high profile situations, so it’s not a surprise.”

“The one thing to me that separates a ‘meme stock’ from just any hot stock is a passion or fervor. I think it certainly applies in the case of DJT,” he stated.

Lucas Mantle, head of data science at retail trading data specialist VandaTrack, said that there is “definitely potential” for TMTG to become a meme stock. However, “I just would like a bit more data on the magnitude of flows just to make that call.”

In a statement to The Hill, Shannon Devine, a Truth Social spokesperson, said that the company will soon start expanding, which could eventually contribute to propping up the share prices.

“With its transition into a public company, Truth Social aims to robustly expand and enhance the platform, while vehemently defending the free speech rights of our users. We are leading an entire movement to reassert free expression in the digital space.”

Trump campaign spokesperson Steven Cheung said that Truth Social “is hot as a pistol” and is the “only place, aside from speeches and interviews, where the American people can get President Trump’s message directly from him.”

https://www.theepochtimes.com/business/trump-media-stock-surges-24-percent-in-first-week-of-trading-5618660