Donald Trump’s media group is in free fall on Wall Street, after soaring during its IPO two weeks ago, robbing the Republican presidential candidate’s fortune by billions of dollars.
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During the first trading session of Trump Media and Technology Group (TMTG) on March 26, the group’s valuation rose to nearly $11 billion.
But since then, it has fallen by almost 60% to now only weigh 4.4 billion dollars. The stock was worth $32.41 as of Thursday’s close.
This is a major development for Donald Trump, who controls 57.3% of TMTG’s shares and faces two judgments that could force him to pay out more than half a billion dollars, if his appeals are rejected.
Candidate for the November presidential election against Joe Biden, he will not be able to sell any of his shares during the first six months of trading, unless the board of directors expressly authorizes him to do so.
“Nothing can surprise me with the price of this stock. It could go up to 100 dollars or fall to a dollar, that wouldn’t shock me,” summarizes Matthew Kennedy, of Renaissance Capital, a firm specializing in IPOs.
A document published at the beginning of April showed that TMTG – which oversees the social network Truth Social, launched in February 2022 – had only generated $4 million in turnover in 2023 with, as a result, a net loss of 58 million.
“I don’t know of any other company that has such a gap between its revenues and its market capitalization,” even at its current level, says Mr. Kennedy.
To justify this valuation, TMTG should generate significant profits in the near future. “But I don’t see any plausible scenario in which that could happen,” says Jay Ritter, a professor at the University of Florida who specializes in IPOs.
“The media industry is in decline, and this group is totally linked to Donald Trump, who is not eternal,” observes the academic.
“Ideological motivations”
How can we explain, then, the extent of this capitalization, greater than that of the famous fast-food chain Shake Shack or the tire manufacturer Goodyear?
“It’s a ‘meme stock’,” says Matthew Kennedy, using the expression born at the beginning of 2021, when small stock marketers, united on the social network Reddit, propelled several securities of companies in difficulty to the sky.
“It’s a combination of short-term speculators but also (…) small individual investors who want to believe in this company and don’t worry about the fundamentals,” said Jay Ritter, comparing TMTG to the chain of stores. of GameStop video games, emblem of “meme stocks”.
The fall in valuation probably results, according to general opinion, from the disengagement of speculators, eager to make a profit in the short term.
An investor, contacted via Reddit, explains, on condition of anonymity, that he made capital gains by buying and then selling very early, before betting downward on the stock, “because it was really overpriced”.
Others were shocked, according to Jay Ritter, by the publication of TMTG’s financial statements. The prospect of a massive sale of securities, as soon as possible, by Donald Trump himself, in need of liquidity, also works against the action.
But “many buyers probably have ideological motivations. They are Trump supporters,” notes the academic.
“Single action”
On Reddit, drowned under a flood of Internet users boasting of having bet on TMTG on the decline, a few rare voices emerge to defend the group.
“My father says he bought for his grandchildren, (…) that all the tech and social media companies are going to dive, except for this one,” writes a user of the platform.
“It’s a unique action on the American market,” according to Matthew Kennedy. “No American politician is so tied to a public company.”
Those who attack TMTG by trying to bring it down much lower “are going to be disappointed,” warns Larry, another stock marketer contacted via Reddit.
“Shareholders could benefit from a second Trump term, particularly if he continues to use (Truth Social) as his official platform. It’s a multibillion-dollar bet on his election.”
