Donald Trump’s media firm soars in stock market debut
The inauguration of Donald Trump’s media company on the stock market witnessed a remarkable surge in its shares. Early trading saw a surge past $70, propelling the firm’s market value to over $9 billion. Although closing at around $58 by the end of the day, the shares still marked an increase of over 16%.
This highly anticipated event injected over $200 million into the coffers of Trump Media & Technology Group and bestowed upon the former president a stake valued at more than $4 billion. However, analysts express skepticism, suggesting that this valuation exceeds the firm’s actual performance.
Truth Social, Trump Media’s Twitter-like platform, generated a mere $3.3 million in revenue during the initial nine months of the previous year, incurring losses close to $50 million. While the platform claims to have attracted 8.9 million accounts since its public launch in 2022 as an alternative to mainstream platforms like Facebook, the actual active user base remains uncertain.
In comparison, Reddit, which recently went public, commands a market value of around $11 billion, boasting over 70 million users and raking in $800 million in revenue last year.
Kristi Marvin, CEO of SPACInsider, likened Trump Media, trading under the ticker DJT reflecting Mr. Trump’s initials, to a meme stock, where prices often detach from underlying business fundamentals.
Interest in Trump Media has also been fuelled by individual investors, as opposed to Wall Street firms, many of them Trump supporters.
“Everybody expected to trade a little bit crazy today, which it has,” she said. “The real question is how does it trade a week from now, two weeks from now and nobody knows.”
The deal to list Trump Media was first announced in 2021.
The move was accomplished via what is known as a SPAC, a merger with a publicly listed shell company, Digital World Acquisition Corp, which was expressly created to buy a company and take it public.
The deal was delayed by government investigations and other hurdles, but regulators cleared it earlier this year and Digital World shareholders voted in favour last week.
Ahead of the listing on the Nasdaq exchange, Trump Media officials called it a “pivotal moment” for the firm – and the wider media landscape.
“As a public company, we will passionately pursue our vision to build a movement to reclaim the Internet from Big Tech censors,” said Trump Media chief executive Devin Nunes, a former congressman.
“We will continue to fulfill our commitment to Americans to serve as a safe harbour for free expression and to stand up to the ever-growing army of speech suppressors.”
The debut comes at a critical moment for Mr Trump, who has been scrambling for cash to pay legal penalties and owns more than half of the firm’s shares.
He is currently barred from selling his holdings for at least six months, making it difficult for him to tap the windfall immediately.
The company’s board, which is stocked with allies including one of his sons, could potentially change that rule, but analysts have said they think that would be unlikely to happen immediately.
If Mr Trump were to sell a significant chunk of his shares, it could hurt the share price.
Investors face other risks as well, tied to Mr Trump’s political fortunes and his 2024 presidential campaign.
A loss might be expected to hurt the share price, but a win could have the opposite effect, especially if it generated further demand from buyers hoping to curry favor with Mr. Trump, said Michael Ohlrogge, a law professor at New York University.
However, Prof Ohlrogge said the current share price is “far, far elevated above what anyone would consider its fundamental value”.
