Trump’s social media project is burning money and losing users. Nevertheless, the company is worth billions of dollars on the stock market. What’s going on there?
As usual with Donald Trump, the beginning was fireworks: when his social media network Truth Social launched, the share price of the shell company TMTG went through the roof. The smoke has now cleared and the share price has fallen sharply after poor business figures. Nevertheless, the company is still valued absurdly high on the stock market. Trump defies normal evaluation standards – he is a master of self-promotion and self-dramatization.
Detached from any reality, Trump Media is valued at $6.5 billion on the stock market. The company’s official business model is to combat major technology companies such as Facebook parent Meta. The reason: They allegedly suppress voices in their social networks that do not correspond to their “woke ideology”. Truth Social has not yet made any money from this – on the contrary. Last year, the project made a loss of around $58 million with sales of around $4 million.
According to CNN, Truth Social is even losing users. The US news channel relies on figures provided to it by the web analysis company Similarweb. According to this, Truth Social only had 494,000 monthly active US users on iOS and Android combined in February. That’s a fraction of the 75 million at X (formerly Twitter) and the 142 million at Facebook. Even Meta’s X clone Threads had more than ten times as many monthly active users as Truth Social in February. Trump’s company itself does not publish user numbers.
Still, Truth Social trades at 1,500 times sales. To put it into perspective: Meta trades at 9.3 times sales. Seen this way, a valuation of Truth Social of only around $40 million would be appropriate – if one ignores the fact that Meta achieved sales of almost $135 billion in the last quarter alone with a profit of around $14 billion.
bankruptcies
The price development is a bet on one man: Trump. In all likelihood, he will run against incumbent Joe Biden in the US presidential election at the beginning of November. And it is quite likely that he will win the duel and move back into the White House. A second term in office could be very lucrative for Trump Media, for example because Truth Social will then be the US President’s most important means of communication. Companies are allowed to place advertising there – if only to score points with Trump or not fall into disgrace.
Against this background, it is studiously ignored that some of Trump’s ventures have gone bankrupt in the past – including the project that went public before Truth Social, also under the ticker symbol DJT, Trump’s initials: Trump Hotels and Casino Resorts. It collapsed spectacularly in 2004 and was subsequently delisted from the New York Stock Exchange.
Other projects only survived because they were either sold or creditors accommodated Trump and forgave him part of the debt because bankruptcy would have cost them more money. Trump Media explicitly pointed to Trump as a risk in its stock market project: “A number of companies that were linked to President Trump have filed for bankruptcy. There can be no guarantee that TMTG will not also go bankrupt.”
In addition, Trump is being prosecuted in several cases at the same time. In a trial, he was fined hundreds of millions of dollars for fraud because he inflated the value of his real estate holdings in order to get cheaper loans. Or as Trump Media put it: “Donald J. Trump is the subject of numerous legal proceedings, the scope and scope of which are unprecedented for a former President of the United States and current candidate for that office. An unfavorable outcome in one or more of the ongoing legal proceedings involving “Implicating President Trump could negatively impact TMTG and its Truth Social platform.”
“Have fun”
But that also means: the fate of the share price depends on Trump. If he loses to Biden, the share price could plummet. The 77-year-old is the head of the company, the main shareholder and the most important user.
At the moment, however, it looks as if the stock market bubble could expand significantly. “What are we all doing here?” asked Matt Levine, a columnist at “Bloomberg” in his newsletter. The answer is: “no fundamental analysis”. Maybe it’s “having fun on the Internet”, maybe it’s “a complex game of mass psychology”. Investments today may also be a form of self-expression: “We buy stocks and cryptocurrencies with which we identify and feel better when they rise.” Many people would buy Trump Media stocks simply because it shows their support for Trump.
So some of these shareholders probably don’t care about whether Truth Social will ever make money. Meanwhile, Trump is impressively demonstrating that his business model still works wonderfully. After some of his projects flopped, he managed to resurrect himself through the popular reality show “The Apprentice”, in which he was the main character from 2004 to 2015 and portrayed an extremely successful businessman. It brought him enormous publicity and a lot of money. As the show came to an end, Trump was running for the Republican presidential nomination to stay in the spotlight, then the completely unexpected happened: he not only became a candidate, but also President of the United States.
TMTG’s IPO made Trump – on paper – much richer. His share package is currently worth almost $3.8 billion. However, he is not allowed to sell his shares yet; after the IPO, a six-month blocking period applies to him and other existing shareholders. But it is likely that the board, which is extremely friendly to Trump, will grant him an exemption if necessary. Given the ongoing lawsuits and looming fines, Trump could need a lot of money in the short term.