By Martha Mendoza – The Associated Press
There were lawsuits, short selling and rampant speculation. As Trump Media & Technology Group approaches its first month as a publicly traded company, it’s clear that, like the man it takes its name from, there’s nothing typical about the stock.
“If I woke up tomorrow and the stock was at zero dollars or 100, I wouldn’t be surprised.”said Matthew Tuttle, a professional investor who bought $800 worth of Trump Media shares last week, when they were at an all-time low. A day later, its value had skyrocketed.
[Las acciones de la red social de Trump se disparan en su primer día en bolsa: así podría ayudarle (o no) en sus problemas de liquidez]
“This is not going to move based on fundamentals, earnings or anything I was taught in business school about how a stock is supposed to move,” he said.
With Trump facing dozens of federal criminal charges and hundreds of millions in legal fees, Trump Media went public on March 26 on the Nasdaq market. Unlike many other stocks, it’s been difficult for traditional analysts and investors to figure out where it’s headed.
Here are some key insights from experts and regulator records that help explain why shares of Trump Media — whose symbol is DJT — have gone up and down, and why its performance continues to confound Wall Street expectations:
Trump Media is Trump
The volatility of the stock, according to experts, is linked to Trump Media’s main asset: Donald Trump. Trump Media manages the social network Truth Social, which Trump created after being expelled from Twitter and Facebook after the attack on the Capitol on January 6, 2021. The former Republican president, his party’s presumptive candidate for the White House this year, is a prolific Truth Social user and has a legion of staunch followers.
“I LOVE SOCIAL TRUTH, I LOVE THE TRUTH!” Trump posted the day his company went public.
Most large investors have resisted buying shares of the company. Based in Sarasota (Florida), Trump Media has been losing a lot of money and struggling to increase their income, according to regulatory filings. That does not seem to have deterred the former president’s supporters from taking advantage of the opportunity to invest in a part of him.
“It’s all out of the ordinary,” said Julian Klymochko, chief executive of Calgary-based Accelerate Financial Technologies Inc.
“I call it the mother of all meme stocks,” he said, using an oft-repeated phrase about Trump Media that refers to the nickname given to stocks that get caught up in the online hype and soar far beyond than traditional analysis says they are worth.
Small investors lead the way
The first day looked like an unexpected victory for Trump, who controls about 65% of the shares, and other early investors: the shares rose 59%, to $79.38. Trump’s wealth immediately grew to $8 billion on paper, but he was unable to withdraw the cash because of a “lockup” clause that generally prevents company insiders from selling newly issued shares for six months. .
The stock began to decline, but not without almost daily ups and downs with high trading volume. The operation has been driven mainly by individual investors who, according to Devin Nunes, CEO of Trump Media and former Republican congressman, believe “in our mission to create a border of free speech against big technology companies.”
[Trump consideró esta visa “muy mala” para EE.UU. Su compañía Truth Social la solicitó para contratar a un migrante]
These retail investors are usually day traders less sophisticated. Some banded together to become a powerful force during the COVID-19 pandemic when they mobilized online to pump money into stocks of struggling companies like video game retailer GameStop and movie theater operator AMC Entertainment, driving them to new highs. while large investors suffered huge losses because they had been betting against the stock.
Recent posts in a Truth Social group dedicated to discussing Trump Media stock have referred to the purchase not just as an investment, but as a movement of “MAGA patriots putting our money where our mouth is,” in reference to the movement of trump ‘Make America Great Again’.
In mid-April, The Washington Post delved into small investors who buy stocks as a “badge of honor” and urge others to do the same. The newspaper cited posts from Truth Social users and their ups and downs after investing and losing money. Some disenchanted or uncertain people have written that they have “risked literally everything” and that the losses are “difficult to digest.”
Outlook is uncertain
Truth Social launched in 2022, and the former president uses the platform as he previously used Twitter, now known as X: to spread disinformation, praise his followers and attack his political rivals.
Trump rejoined X in November 2022, although he has only posted once. He has limited himself to Truth Social, which had 18 million visits in the first three months of 2024, compared to 18 billion for X, according to research company Similarweb.
Trump Media’s prospects are unclear, despite optimistic statements from Trump and his executives. Nunes said last week that “the company’s financial situation is very solid, especially for an emerging technology company in this early phase of growth.”
The company, however, lost almost 58.2 million dollars last year, while only generating 4.1 million of dollars in revenue, according to Securities and Exchange Commission filings. He has 200 million dollars in the bank and no debt.
Trump’s retail investors appear to be ignoring the company’s fundamentals and betting that the former president will make sure it succeeds, according to analysts and other experts.
They “are thinking (Trump) will come up with something, he always has,” said John Rekenthaler, vice president of research at Morningstar Research Services. “And it’s true, (Trump) always lands on his feet, but the people who invest with him don’t always come out well.”
[La red social de Trump cotizará en bolsa a partir del martes. Esto es lo que debe saber]
Financial advisors and experts are less optimistic about their prospects. According to them, Trump Media’s financial documents do not indicate that it has a strategy that generates profits and the company’s directors have little experience in social networks.
Executives and board members include Nunes, a former congressman and Trump ally, and one of the former president’s sons, Donald Trump Jr. Also Kash Patel, a top national security adviser and Trump Administration official, and Robert Lighthizer, another former official.
It’s a recipe for corporate collapse, experts said.
“Sooner or later it’s going to get complicated,” said University of Michigan law professor Albert Choi. According to him, it is most likely that Trump Media runs out of cash and is forced to liquidate or file for bankruptcy.
Other risks
The company has a unique risk, experts say: Trump is not known for being disciplined, especially on social media. As a majority shareholder, he could be fined or sanctioned for making false statements about the company. This happened to Elon Musk in 2018 after he hinted that he would take Twitter private. Musk settled with the SEC over a $40 million fine and was forced to resign as president of Tesla.
SEC records also warn that Trump faces legal problems that could jeopardize the stability of his company. A New York judge handed down a $454 million civil fraud judgment against the former president after concluding that he and others had deceived banks and insurers by exaggerating his wealth on financial statements. Trump appealed the fine and posted bail of $175 million while the case is being studied.
Trump Media has also been the subject of lawsuits. In February, Trump Media co-founders Andy Litinsky and Wes Moss, who met Trump while participating in his reality show The Apprentice, they sued the company to prevent Trump from diluting his 8.6% stake by increasing authorized shares from 120 million to 1 billion. Trump sued them back, arguing that they should give up their shares because they had wrongfully created it.
This is not the first time that the former president has run a publicly traded company. In 1995, Trump Hotels and Casino Resorts began trading on the New York Stock Exchange under the same symbol DJT. Over the next nine years, he lost money and declared bankruptcy.
