Trump's New Stock
March 29, 2024
DJT, up until this week, these three letters only represented the initials of Former President Trump. Now, however, they serve as the ticker symbol for Trump Media & Technology Group, the owner of the right-wing social media platform Truth Social, run by former Republican congressman Devin Nunes.
Through a special purpose acquisition company (Digital World Acquisition Company, or DWAC), a manner of going public while bypassing the traditional IPO process, the president’s media company began trading this week and has soared. Just six months ago, shares of DWAC traded around the $16 a share mark; Thursday, DJT closed at nearly $62 per share, valued at several billion dollars.
Serious criticisms of the multi-billion dollar valuation have prompted comparisons to the “meme” stock runs of Gamestop and AMC. The company appears to be suffering from a hemorrhaging of money and a lack of users. In the first nine months of 2023, it lost $49 million. CNN cites SimilarWeb statistics that put Truth Social’s February user figures at under half a million. Nevertheless, the stock traded above $60 a share Thursday, valuing Trump’s massive stake in the billions.
CNBC’s Dan Mangan notes a potential concern for Former President Trump, who may badly need cash to meet mounting legal obligations: Trump cannot sell any of his shares for six months. Based on the rules of the SPAC, a lockup period of six months prevents the former president from making any sales unless the board votes to waive the restriction. Mangan points out that large share sales from Trump could weaken investor confidence and hurt the share price.
The market is closed Friday, but what next will have in store for shareholders of DJT remains unclear. A significant amount of short selling (effectively betting against the stock) has occurred but that is a risky endeavor. With the volatility of DJT’s share price, there is no telling how high or low it could go in the near future, and if it jumps further, short sellers could get burned, even if the stock eventually sees its price subside.
Whether Trump is truly a successful businessman has been a topic of great discussion in recent years. The son of successful real estate tycoon Fred Trump has a long list of failures, including an airline and a casino. If he is successfully able to liquidate a sizeable amount of his Truth Social shares anywhere near current valuations, the venture certainly could be considered a success for the former president. Whether the Truth Social platform itself ends up a success looks more unlikely. With financial losses and unimpressive user data, the platform’s future looks bleak. How the next several months play out with the stock will be very interesting, especially as the namesake founder of Trump Media & Technology Group navigates both a list of legal battles and an election campaign.