Truth Social Stock Collapses
Easy Come, Easy Go.
CNBC (“Trump Media stock closes 21% lower after company reports $58 million loss for 2023“):
The share price of Trump Media closed trading 21.47% lower on Monday, hours after the social media app company tied to former President Donald Trump reported a net loss of $58.2 million on revenue of just $4.1 million in 2023.
Trump Media & Technology Group shares plunged by more than 25% around 1:08 p.m. ET before recovering slightly later in the day.
Trump Media’s closing price was $48.66 per share, more than $30 lower than its high of $79.38 per share, which it hit last week on the heels of becoming publicly traded.
Despite Monday’s steep drop, the company’s market capitalization was still nearly $6.6 billion.
But as of Monday’s closing price, Trump’s shares in Trump Media were worth about $3.8 billion, or around $2.5 billion less than they were last week.
Earlier Monday, Trump Media in its 8-K filing with the Securities and Exchange Commission since it went public through a merger with a shell company, revealed the loss for last year.
Much of the net loss appears to come from $39.4 million in interest expense, according to the filing.
NYT (“Trump Media Shares Slump as Early Fervor Fades“) adds:
Still, shares of Trump Media were higher than they were immediately before the firm merged with a public shell company on Tuesday and began trading on the Nasdaq. Strong support for the merged company after it began trading pushed its market value as high as $10 billion at one point last week.
That raised eyebrows across Wall Street, given the relatively small size of Trump Media’s business. A filing on Monday showed that the company generated just $750,000 in revenue in the fourth quarter last year, bringing its full-year total to $4.1 million. Trump Media recorded a $58 million loss in 2023. It got more than $300 million in cash as part of its merger with the shell company.
All the company’s revenues come from advertising on Truth Social, the digital platform that has become Mr. Trump’s main outlet for reaching his supporters and blasting his critics, political opponents and other perceived enemies, including the prosecutors and judges involved in his criminal and civil cases.
[…]
Trump Media stands out on Wall Street as the market’s most “shorted” stock — shares that investors bet will fall. Derivatives linked to the stock, which allow investors to speculate on its future price, have also been popular, suggesting that traders are braced for more big price swings — both higher and lower — in the weeks to come.
It is not uncommon for so-called meme stocks, which are heavily influenced by momentum and the enthusiasm of masses of small shareholders, to be extremely volatile, prone to sudden and steep increases and declines.
NBC News (“Trump Media auditor warns that losses ‘raise substantial doubt’ about company’s ability to continue“):
An auditor has raised doubts about the ability of former President Donald Trump’s publicly traded company to stay in business, according to a new regulatory filing.
[..]
The filing includes a note from an independent accounting firm, Colorado-based BF Borgers CPA PC, warning that Trump Media’s “operating losses raise substantial doubt about its ability to continue as a going concern.” In a separate filing Monday, Trump Media cited the auditor’s analysis in describing the risks facing the business. Borgers has worked with Trump Media since 2022.
[…]
A spokesperson for Trump Media referred a request for comment to a Monday news release that quotes Trump Media CEO and former U.S. Rep. Devin Nunes.
“Closing out the 2023 financials related to the merger, Truth Social today has no debt and over $200 million in the bank, opening numerous possibilities for expanding and enhancing our platform,” Nunes said in the release. “We intend to take full advantage of these opportunities to make Truth Social the quintessential free-speech platform for the American people.”
In the filing, the company acknowledged that it expects to operate at a loss for the “foreseeable future” as it works to expand Truth Social’s user base and attract more advertisers. It said it would be “premature” to predict when it will attain profitability and positive cash flows from its operations.
Truly a shame.
The actual price of this stock should be about 2:02 based on its cash position and revenue. But given they have no clear way to profitability, the stock is going to zero. They don’t have a legitimate business.
That stock going to zero. Question is will it take six weeks or six months?
Trump Steaks, Trump Airlines, Trump Vodka, Trump Mortgage, Trump Magazine, Trump University, Trump Ice, Trump’s New Jersey Generals, Trump Network, Trump for President 2020, and now Trump’s Truth Social! So much winning (NOT)!!!
Dang, missed the best time to sell short. But you knew there’d be one.
@EddieInCA:
I’ll give it seven months. The stock will stay above zero until Trump loses in November. The fantasy of the business’s viability as ”the quintessential free-speech platform for the American people” will last until then.
Oh I remember the late 90’s and early 00’s and the internet boom. IPOs of low P/E ratios and so many of these companies, Amazon being the most notable exception, having short existences.
I’m really unclear on what is happening here. I assume that there are very few shares actually on the market, and it is those few that are being bid up. Which means that if someone where to actually try to sell a substantial amount of those not yet on the market, the price would collapse. But conversely, one of these wealthy shareholders could easily raise the price by buying small quantities of those available and creating an artificial demand for them. I suspect this stock will yoyo like bitcoin until the rush for the doors happens.
But my opinon on financial matters is worth about a cup of coffee, if I included a Starbucks gift card with it.
The Trump Media stock probably has achieved the goals established by its creators. Money got moved from some people to other people; mission accomplished. Zero Mostel was a more charming Max Bialystock than Trump and more svelte, but the remake rarely lives up to the original.
@Scott F.:
Three months from now, they’re going to have to report quarterly earnings. Three months after that, they’ll have to do it again.
In other words, we can’t give you the information you need to make and informed decision because doing so would expose how fraudulent our business actually is.
@MarkedMan:
I hate stock markets. They are kind of a mix of fantasy and reality, and it’s usually unclear which is which.
A fool and his money are soon parted.
I’m glad that MAGAts are going to lose money. It’s good for them to feel some of the pain they so readily inflict on others. I hope many thousands of them went all in, mortgaged their homes, drained their accounts, and end up bankrupt. No pity for these people. I’m sorry that Trump will gain by feeding on their idiocy, but we as yet have no cure for stupidity.
@EddieInCA: Yeah. It will eventually go to zero. In the meantime, I’m not feeling the glee over it dropping from 30 times what it’s worth to 25 times. At this point Trump still gets a lot of money for nothing. Wake me up when it gets to single digits. I’ll be amazed if Trump doesn’t have some way around the requirement he hold for six months.
This is pretty much what everyone expected–that a lot of the initial investment would be people trying to make a quick buck or arranging to short the stock.
Also, this is why I have doubted the entire “the board will let Trump liquidate his stocks” ahead of the normal 6 month timelines. My understanding is that any such sell-off–even if it’s a just portion of Trumps shares–has to be public. And I think the moment that happens, the price of the stock fully tanks, taking the rest of the board’s equity investments with it.
Perhaps the board would let him do that (and destroy the company’s limited value) because of its makeup. But I honestly think that would leave them open to a class action from jilted investors.
But hey, I am usually wrong when I make predictions. And what’s one more lawsuit at this point?
@gVOR10:
The float on the stock is only 30M shares out of a total of 135M shares. But with earnout shares, the total could be 205M shares, which are all locked for six months. That means that 175M shares are at the mercy of the 30M shares available for trades. While a 30M shares float is a paltry amount, it’s enough to dissuade a large hedge fund from trying to prop up the stock. 1M shares at the current price would cost $50M. I don’t care how much money you have, no one wants to lose $50M.
Expect alot of volatility, as the short positions get covered regularly as they reel in more suckers “buying on the dip.” The pros are going to make a fortune, as I said a few days ago. The rubes are going to lost most of their investments.
Even ‘Bond King’ Bill Gross is getting in on Trump Media’s options-trading frenzy
Schadenfreude Alert.
Given those rancid financial fundamentals, and the fact that the Trump Media CEO is the hapless former House Representative Devin Nunes, given all of that … how many people are shocked that the value of Trump Media equities plummeted ‘Enron-Style’?
So, yes of course I’m feeling really badly for those hard working people who invested in Trump’s lastest business failure. My only wish is that Trump himself could share in the loss.
______________
It should be worth noting … The stock may be worth a few billion for a number of people in Saudi Arabia. Heck, Even the failson Jared was given control of a couple billion dollar ‘investment’.
The stock only has one significant asset – Donald Trump posts and however these can be monetized – such as advertisers buying ads, people paying fees to be on the site, or whatever. No one else with any significant following posts there.
Donald Trump is nuttier than squirrel poop and his mental/neurological health is declining. So, going forward, how much of a store of value are future Trump posts?
@al Ameda:
Elon Musk has similar intentions, similar aspirations, and algorithms that preference very Trumpy content, so how is that working out, user-wise?
@Argon:
That seems to be part of the theory of why the stock is worth something. But what is there the Saudis or Russians or whoever could conceivably get that they would pay billions for?
The MAGAs are saying that the stock only dropped by 48 cents a share. I don’t know from whence that figure came.
In any normal transaction I would feel sympathy for the suc… investors but this one involves trump who is the antithesis of ‘normal’. Anybody investing in any trump adjacent business at this point deserves to be taken to the cleaners.
@charontwo:
For sure, they won’t pay billions after Lardass loses in November. They likely won’t pay them before, either.
@CSK:
Where else? They pulled it out of their ass.
@EddieInCA: narrow free float … Trumpian volatility.
The entire thing is a sucker-school feeding frenzy, rather like those videos of dolphins blowing bubbles around schools of fish…
@EddieInCA: it is more delicious than that, they do not even make a pretence…
I think the quote from the actual 8-K is the most delicious and as well indicative of the situation
Does not and really doesn’t intend to collect industry standard metrics.
@Argon: the stock in a publicly listed company that is required to do SEC disclosures is not a very attractive means to launder nor to use influence spend. Property buys, strawman donations / contributions. But not a publicly listed entity with disclosures of who its Beneficial Owners are.
This is about fleecing the rubes – there are far better non-transparent and thus lower risk ways to do influence-money-flows.
@Kathy: Stock markets merely make the human behaviour visible, that is not a reason to hate them, rather they make visible the typical mix of rationality and irrationality that is human action, even those people who flatter themselves to be very rational.
@EddieInCA: It seems likely that the side route of grifting in revenue terms is that the MAGA PACs spend idiotic amounts of media spend on Truth Social – pumping money to Trump doubly while doing rather little.
So should expect that it manages to stay with nose above water into 2025, but I would not bet on 26 (barring a Trump win and then some corrupt arrangements).
There is perhaps an added aspect of Trump self-dealing to wider harm for the Republicans in it seems very plausible that otherwise useful donations are diverted not only to his legal fees but also to spending on this which would seem to me to be prima facie bad use of such money from a win-election utility PoV but very much in keeping with Trump short-termism and self-dealing.
And a double fleecing of the rubes.
I’d say “tulip bulbs?!” Except that we didn’t even have the first half of that equation…
Based on reports I’ve read elsewhere, it looks like the experienced punters grabbed everything first and a lot of them were able to sell out at the top of the market to the Trump devotees. Who will now be learning what “short sale” means. Have fun, suckers!
Anyone know how it did today?
Pardon my ignorance…
Why is it worth… anything? I mean, I guess because people are willing to pay for it. But who is buying it? And will it be worth anything when Trump is able to sell it? Who will buy it if Trump is selling it? Isn’t the whole cache that it’s Trump’s?
@MarkedMan: @Kazzy:
Hey, the stockholder may lose everything, but they get to own the libs!
@MarkedMan: Was also curious, just checked. Steady, dropped a little over 1%.
If those numbers are consistent quarter over quarter, don’t they run the risk of being reclassified as a hobby, as opposed to a business? With important tax consequences?
@DrDaveT: no that is a sole proprietor type problem, not a listed corporation
Can Tish James seize Trump’s Truth Social Stock? Should she? What would that do to the value of the stock?