Since its spectacular debut last week, which made former US President Donald Trump one of the world's 500 richest people, Trump Media & Technology Group has experienced a series of setbacks that would sink the common stock.
But this highly charged investment in social media may defy the odds, at least for a while.
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Some call Trump Media & Technology Group a โmeme stock.โ But in financial markets, trust tends to depend on the fundamentals of finance, not the risk of emotion or personal confidence.
Trump Media first appeared on March 25 on the Nasdaq stock market and share prices soared to $79 at one point. Then, early Monday, the company revealed that it had revenue of just $4 million last year with net losses of nearly $60 million.
The stock lost 21% of its value in one day, closing just below its initial offering price of $49.95. As of Wednesday, shares were fairly stable, closing at $48.81 per share.
As an investment, Trump Media was always inherently risky. This was partly because it used an alternative form of going public, known as a special purpose acquisition company or SPAC. The number of SPACs soared in 2020 and 2021, but the boom quickly faded as the stock prices of most of those companies fell.
Some investors appear to have placed their trust in Trump himself, despite the company's weak fundamentals so far. Still others may be using their investment dollars to support the presidential candidate, almost like a political donation.
Since its spectacular debut last week, which made former US President Donald Trump one of the world's 500 richest people, Trump Media & Technology Group has experienced a series of setbacks that would sink the common stock.
But this highly charged investment in social media may defy the odds, at least for a while.
Some call them โmeme stocks,โ or stocks that attract investors for emotional reasons. In this case specifically, some point to Trump supporters buying as a political statement. Whatever it is, Trump Media relies on trust in a single individual, Mr. Trump, at least as much as it does on the potential growth of an entire company. Trump Media is the owner of Truth Social, Trump's social network.
Why do we write this?
A story centered on
Some call Trump Media & Technology Group a โmeme stock.โ But in financial markets, trust tends to depend on the fundamentals of finance, not the risk of emotion or personal confidence.
"I don't think it has to do with economics," says Michael Klausner, a professor at Stanford Law School. โAll this is just a cult action. [And] "If the group of followers is strong enough... maybe in the short term it will not be risky, because there is a great will on the part of these people to continue buying it."
Trump Media first appeared on March 25 on the Nasdaq stock market under the symbol DJT, and share prices soared in its first days of trading, topping $79 at one point. Then, early Monday, in a regulatory filing, the company revealed that it had revenue of only about $4 million last year and posted net losses of nearly $60 million. "The company's operating losses raise substantial doubts about its ability to continue as a going concern," the document warned.
The stock then plummeted, losing 21% of its value in one day and closing just below its initial offering price of $49.95. On Tuesday, shares rose slightly, closing at $51.60, just minutes after a Bloomberg report that Trump was suing two of the company's co-founders for "reckless and wasteful decisions" that hurt the company. The co-founders, in turn, sued Trump for attempting to dilute his stake in the company.
