Former President Donald Trump's media company now officially listed on the stock market. Shares of Trump Media & Technology Group, the parent company of Truth Social, listed on Nasdaq after Trump deals merged with a publicly traded shell company.
At the start of trading on Tuesday, Trump Media was valued at a staggering $10 billion. At the beginning of its first day of trading, the Trump Media & Technology Group corporation soared 59% and then fell back toward Earth in the last hour. It ended at $57.99, a gain of 16% on the day.
However, there are some questions about the underlying business of Trump's social media platform and how that translates to the stock price. To learn more about this, โMarketplace Morning Reportโ host David Brancaccio spoke with Jay Ritter, a finance professor at the University of Florida. The following is an edited version of his conversation.
David Brancaccio: an analyst see $10 billion of current worth?
Jay Ritter: If you look at the company, as a result of this SPAC merger, it has about $300 million in cash. But will it be so profitable in the future that it can justify such a high valuation? very unlikely. The company only has annual revenues of about $5 million. You are losing money. And in terms of where do you get that income from? Well, it's a combination of advertising and paid subscribers, but neither of those revenue streams are growing very quickly. So this valuation is crazy.
Brancaccio: So it may not be an investment in the traditional sense of investing, it may be more like putting up a Trump for President sign in front of your house, a sign of support for a candidate, perhaps?
Ritter: I assume that almost everyone who buys stocks is a Trump supporter. Where it is more of a purchase to show loyalty than to think of this as a good long-term investment.
Brancaccio: Now a majority shareholder, former President Trump's net worth at this time has increased significantly given the stock price and valuation of that company. This is a potential billion-dollar windfall for Trump. But as I understand it, the company's rules state that you cannot sell at this time and withdraw money. Could the company change that rule?
Ritter: as standard with SPAC mergers, shareholders are typically locked in for six months, as is the case here. Its block prohibits selling but also using the shares as guarantee for a loan. Now, the board could, in theory, waive this six-month lockout, but if it did, the stock price would likely fall immediately. Therefore, the ability to convert this paper wealth into cash is quite limited.
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