Donald Trump's social media company took a nosedive on Monday, with shares plummeting by over 20%. This drop happened less than a week after the company went public with the DJT ticker. The decline was triggered by Trump Media & Technology Group reporting a staggering loss of nearly $60 million in the previous year, while only managing to rake in around $4 million in revenue.
This price plunge also resulted in a significant hit to the former president's net worth, shrinking it by a whopping $1 billion, according to Bloomberg. Last week, the company experienced a surge in shares, giving it a staggering $11 billion valuation. However, many experts had foreseen this tumble, as the company's main product, Truth Social, was shedding users and cash.
The sudden rise in share prices drew comparisons to the meme stock frenzy of the pandemic era, when stocks like GameStop and AMC soared despite fundamental weaknesses in their businesses, such as revenue.
Despite the recent setback, shares of Trump Media, which generates revenue solely through advertising on Truth Social, have still risen by almost 200% this year. This surge has been largely driven by individual investors, some of whom seem to be expressing support for the former president as he faces mounting legal challenges and accompanying bills.
Mr. Trump owns nearly 60% of the company and could stand to make a billion-dollar profit when he eventually sells his shares, although he is currently legally prohibited from doing so for another six months, unless the company's board grants him a waiver.
However, investors are taking a risk on a company that, in a recent filing with the Securities and Exchange Commission (SEC), admitted that it "expects to continue to incur operating losses and negative cash flows from operating activities for the foreseeable future".
According to the financial filing, Trump Media paid approximately $40 million in interest expenses and $16 million in operating losses in 2023. The company also expressed "substantial doubt" about its ability to meet its liabilities as they come due.
Truth Social was launched in February 2022, about a year after Trump was banned from Twitter (now X) and Facebook following the violent Capitol riot. Although his accounts on both platforms have been reinstated, he has continued to primarily use Truth Social for his social media posts.
Despite Trump's presence, the platform has struggled to attract a large audience, with estimates from Similarweb suggesting it has only about five million active monthly users, much fewer than its competitors. While Truth Social claims to have about 8.9 million sign-ups, it has not disclosed other key performance metrics that could provide shareholders with a clearer picture of its operations.
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