Trump Media’s Debut (Image Source: IANS)
The shares of Trump Media & Technology Group soared past USD 70 each in opening trade, marking a significant milestone for the company and its founder, former US President Donald Trump. According to the BBC report, with this surge, the firm achieved a market value surpassing USD 9 billion, injecting over USD 200 million into its coffers and giving Trump himself a stake valued at more than USD 5 billion.
However, analysts have raised concerns about the exorbitant valuation, considering the company’s performance. Trump Media operates Truth Social, a platform akin to Twitter, which generated a modest USD 3.3 million in revenue and incurred losses of nearly USD 50 million in the first nine months of last year. Despite claiming 8.9 million account creations since its launch in 2022, the platform’s active user base remains uncertain.
The report added that comparatively, Reddit, a similar social platform, boasts a market value of around USD 11 billion, with over 70 million active users and revenue exceeding USD 800 million last year. The disparity underscores skepticism regarding Trump Media’s valuation, likening it to a meme stock, buoyed by speculative trading rather than solid business fundamentals.
Interest from individual investors, particularly Trump supporters, has further fueled the fervor surrounding Trump Media. Kristi Marvin, CEO of SPACInsider, likened the company’s stock to a meme stock, noting its unpredictability and detachment from underlying business performance.
The listing of Trump Media was facilitated through a SPAC merger with Digital World Acquisition Corp, a publicly listed shell company. Despite delays due to regulatory scrutiny and investigations, the deal was eventually approved, paving the way for Trump Media’s public debut.
Ahead of the listing, Trump Media officials hailed it as a pivotal moment, emphasizing their commitment to challenging Big Tech censorship and fostering free expression online. However, concerns linger regarding Trump’s significant ownership stake, his legal challenges, and potential conflicts of interest.
Trump’s inability to sell his shares for at least six months due to regulatory restrictions adds uncertainty to the company’s future trajectory. Moreover, the company’s board, comprised of Trump allies, faces scrutiny over any potential rule changes allowing Trump to liquidate his holdings.
Analysts caution investors against the inflated share price, emphasizing the disconnect between valuation and fundamental value. The company’s fortunes are intricately tied to Trump’s political endeavors, posing additional risks for investors.
