Former President Donald Trump's social media platform, Truth Social, is set to make a splash on the stock market under the ticker symbol DJT, sparking a firestorm of debate. With a staggering valuation despite limited user base and revenue, the question remains: is this a golden opportunity for investors or a recipe for financial disaster?
Truth Social's parent company, Trump Media & Technology Group (TMTG), completed a merger with Digital World Acquisition Corp., a shell company that skyrocketed in value due to a social media buying frenzy by Trump supporters. This surge wasn't driven by traditional financial metrics, but by a desire to back the former president and potentially profit from his venture.
Trump stands to gain significantly from this listing. His 60% stake in TMTG translates to a whopping $4 billion on paper when Truth Social begins trading. However, there are significant hurdles before he can access this fortune. A six-month lock-up period prevents immediate sale, and early access requires board approval – a board that includes his son and former administration members.
Similar deals often see executives waiting several months before attempting early share sales. Additionally, limitations on selling volume based on trading activity could further restrict Trump's ability to quickly cash in. Granting him a waiver to bypass these safeguards could trigger a stock price collapse, considering the already volatile nature of the market driven by passionate individual investors.
The proposed market value of $6.8 billion for TMTG stands in stark contrast to its meager performance. Since its launch in 2021, Truth Social has generated a mere $5 million in sales, dwarfed by its tens of millions in losses. By comparison, social media giant Reddit, boasting a $9 billion valuation, generated over $800 million in sales last year.
Truth Social's creation stemmed from Trump's expulsion from major platforms after the January 6th Capitol riot. However, with his recent reinstatement on Facebook and X (formerly Twitter), the platform's future purpose beyond financial gain becomes unclear. While Truth Social received a $300 million injection from the deal to fuel competition, it faces a mammoth task in dethroning established social media giants.
This grand debut coincides with ongoing legal challenges for Trump. He faces the immediate obligation to pay $175 million of a $454 million civil fraud judgment while appealing the full amount.
Truth Social's stock market debut is a spectacle fueled by political fervor and a highly inflated valuation. While passionate investors may see a chance to support Trump and potentially prosper, the platform's limited user base and murky future raise concerns about long-term viability. As for Donald Trump, this venture presents a potential financial windfall, but unlocking that value comes with significant hurdles and the risk of jeopardizing a volatile stock price. Only time will tell whether this is a shrewd business move or a gamble destined to crumble.
