Trump's investment in Truth Social suffers $1 billion hit
Donald Trump's investment in social media platform, Truth Social, has lost over $1 billion. This financial setback is due to a reported loss of $58.2 million last year by the company. The loss resulted in a 21.5% plunge in the share value of Trump Media & Technology Group, which oversees Truth Social. The ex-President's substantial investment, previously valued at $4.88 billion post its successful stock market launch last week, dwindled to an estimated $3.83 billion after Monday's market downturn.
Auditor expresses doubt over firm's sustainability
The company's auditor, BF Borgers based in Colorado, has expressed "substantial doubt" about the firm's sustainability due to these losses. In Monday's filings, he indicated that these losses "raise substantial doubt about its ability to continue as a going concern." This statement comes in the wake of Trump Media & Technology Group's reported loss and subsequent drop in share value. The auditor's concerns highlight the financial challenges facing Truth Social.
Trump Media's sales show limited scale of operations
According to regulatory filings, Trump Media recorded sales of merely $4.13 million in 2023. This marks a significant increase from $1.47 million in 2022, but underscores the limited scale of Trump Media's operations and the magnitude of its losses. Despite the increase in sales, the company's financial performance indicates a struggle to achieve profitability amid substantial losses.
CEO maintains positive outlook
Despite the financial setbacks, Devin Nunes, CEO of Trump Media, maintains a positive outlook. He expressed enthusiasm about operating as a public entity and emphasized that "Truth Social today has no debt and over $200m in the bank, opening numerous possibilities for expanding and enhancing our platform." This statement indicates Nunes' confidence in the company's potential for growth despite its current financial challenges.
Trump Media emerges as meme stock despite financial woes
Interestingly, despite its struggles, Trump Media has emerged as a meme stock due to unpredictable market fluctuations over recent months. It now shares this status with stocks like GameStop, that have witnessed unforeseen and volatile rallies in recent years. This development highlights the unpredictable nature of the stock market and the potential for rapid changes in a company's financial standing.
Trading restrictions prevent Trump from liquidating stake
Due to trading restrictions, Trump is currently unable to liquidate his stake in Truth Social. He would require the stock to hold its current value if he intends to generate billions from a sale. This development coincides with Trump grappling with substantial legal expenses and being liable for $454 million following a civil fraud case, adding further financial pressure on the former US President.
Trump Media compared to cryptocurrency
John Rekenthaler, Vice President for research at Morningstar, drew parallels between Trump Media and cryptocurrency. He noted, "As with bitcoin, people buy Trump Media not for future cash flows but because: 1) they expect its price to rise, and 2) they feel an affiliation for the asset." He further stated that for Trump Media investors, "DJT shares represent a currency by which they can express their beliefs and commitment."
