Trump Media & Technology Group (DJT), the parent company overseeing Donald Trump’s social media venture Truth Social, experienced a significant decline of over 21% in its stock value on Monday, marking a notable downturn following its highly anticipated debut the prior week.
Closing at $48.66 on Monday, Trump Media boasted a market capitalization of $6.65 billion, translating to a stake of $3.8 billion for the former president. This figure represents a decline from Trump’s initial stake, which stood at slightly over $4.5 billion after the company’s public introduction last week.
The drop in stock value coincided with an updated regulatory filing released early Monday, shedding light on substantial losses incurred by the company and emphasizing heightened risks associated with its association with the former president.
The filing disclosed that Trump Media recorded sales slightly surpassing $4 million, juxtaposed with net losses nearing $60 million for the full fiscal year ending December 31. The company cautioned investors to anticipate continued losses amidst escalating challenges in achieving profitability.
“Trump Media & Technology Group has historically incurred operating losses and negative cash flows from operating activities,” the filing highlighted.
Moreover, Truth Social, despite attracting approximately 9 million users since its inception, remains heavily reliant on the reputation and popularity of Donald Trump for its success.
The regulatory filing underscored that Trump Media could face elevated risks compared to conventional social media platforms due to its unique offerings and the involvement of the former president. Potential risks encompassed advertiser harassment and scrutiny of Truth Social’s content moderation practices.
“The value of Trump Media & Technology Group’s brand may diminish if the popularity of President Trump were to suffer,” the filing cautioned.
Of significant note, Trump Media acknowledged its heavy dependence on advertising, with ad sales constituting a substantial portion of its revenue stream. Concerns were raised that a decrease in user numbers or engagement, potentially triggered by the departure of prominent individuals and entities who contribute content to Truth Social, could deter advertisers and adversely impact the company’s financial performance.
The filing further disclosed that stakeholders remain subject to a six-month lockup period before being permitted to sell or transfer shares. This lockup period, however, could offer a window of opportunity for the former president, who is contending with financial challenges, including a $454 million fraud penalty and fundraising deficits ahead of a potential 2024 election rematch against Biden.
The sole exception to the lockup period would entail a special dispensation granted by the company’s board, though such a move is likely to be met with legal challenges from public shareholders, according to experts cited by Yahoo Finance.
Trump Media made its public debut on the Nasdaq following a merger with special purpose acquisition company Digital World Acquisition Corp., a transaction endorsed by shareholders in late February.
The genesis of Truth Social stemmed from Donald Trump’s removal from major social media platforms like Facebook and Twitter—referred to as X—following the events of the January 6 Capitol riots in 2021. Despite subsequently regaining access to these platforms, Trump embarked on establishing Truth Social as an alternative.
In its filing, Truth Social reaffirmed its mission to serve as a sanctuary for “cancelled” content creators and foster an environment conducive to unrestricted discourse, devoid of censorship or cancellation due to political affiliations.
