Trump’s Truth Social makes rocky stock debut with $5 billion+ valuation
Former President Donald Trump’s social media platform, Truth Social, officially started trading on the Nasdaq stock exchange on Tuesday under the ticker symbol “DJT.” The move comes after shareholders of the special purpose acquisition company (SPAC), Digital World Acquisition Corp (DWAC), voted on Friday to approve a $1.3 billion merger with Trump Media & Technology Group (TMTG), Truth Social’s parent company.
The newly merged entity began trading with an eye-popping initial market valuation estimated to be between $5 billion and $6 billion, based on DWAC’s stock price, ahead of the merger close. That lofty figure vastly exceeds the revenues Truth Social has generated since its launch in February 2022.
Trump himself stands to be one of the biggest winners, at least on paper. The merger deal gave the former president an estimated 79 million shares of TMTG stock, a stake potentially worth around $3 billion at the combined company’s first-day $5 billion market cap. The windfall arrives at an opportune time for Trump, who faces mounting legal bills related to numerous civil and criminal investigations into his business dealings.
However, TMTG has struggled financially, generating just $3.3 million in revenue in the first nine months of 2023 while racking up over $65 million in losses over the same period, according to filings. Truth Social has also gained a relatively modest following to date, with around 5 million estimated active users — a fraction of established social networks like Twitter.
“Let’s be brutally honest here — the current valuation has very little to do with fundamentals,” said Brian Wieser, a long-time tech and media analyst at Pivot Research Group. “Whether or not Truth Social turns into a viable business down the road, this is entirely a meme stock phenomenon driven by Trump’s cult of personality and political brand among supporters right now.”
meme craze fuels big valuation
Like other “meme stocks” that have traded based more on online hype than traditional valuation metrics, DWAC’s share price saw epic volatility ahead of the TMTG merger. The stock traded as low as $16 in December 2022 after hitting highs above $90 in early 2022. It closed Friday at $41.22 ahead of the merger vote.
“Things have gotten completely disconnected from financial reality at this point,” said Wieser. “A $5–6 billion valuation for a money-losing startup social network with such modest traction doesn’t make any sense under typical analysis.”
Many analysts see Truth Social as overvalued, citing the miniscule revenue compared to its sky-high market cap on day one. Twitter, by comparison, generated $5.1 billion in revenue in 2022 and currently has a market capitalization around $33 billion.
However, the online frenzy around DWAC stock in recent months suggests investors may be betting more on Trump’s continued popularity providing a path to monetization rather than the current fundamentals.
“If Trump manages to get himself re-elected in 2024, you can understand some of the hype around turning this into a massive cash cow platform for his America First movement and allies,” said Dan Ives, an analyst at Wedbush Securities. “But it’s a huge ‘if’ at this point and many roadblocks remain.”
Six-month insider lockup
To retain their lucrative stakes, Trump and other TMTG insiders will have to keep faith in the long-term viability of Truth Social. They face a six-month lockup period restricting sales of the shares they received in the merger until late September.
If the company’s performance doesn’t start rapidly improving by then, the stock could get hammered once insiders start cashing out — a common occurrence seen with SPAC deals.
“In six months we’ll have a much better picture of how this business is truly faring in terms of monetization and growth under full public scrutiny,” said Ives. “The rubber truly meets the road then for this merger’s lofty promises.”
For Trump’s legal team, a precipitous drop in his shares’ value before then could scuttle plans to use that equity to cover costs related to his myriad legal battles, including the Manhattan DA’s criminal case regarding hush money payments and civil lawsuits like the upcoming rape defamation trial.
Win or lose at the ballot box, a Truth Social flame-out may turn the former president’s $3 billion paper fortune into a mirage.
