Trump Media Shares Dip Hits Trump’s Wealth Hard
Donald Trump’s social media venture, Trump Media & Technology Group’s shares have suffered a sharp decline. The company’s stock, which powers the Truth Social platform, has dropped to its lowest point since the merger that brought it public earlier this year. Trump Media has lost about 74% of its value since peaking in March 2024.
The selloff has significantly impacted the wealth of investors, especially Donald Trump. His stake of 114.75 million shares in Trump Media, once valued at $6.2 billion in May, has now plummeted to just around $2 billion. This sharp decline has caused Trump to drop off Bloomberg’s Billionaires Index, where he was previously ranked among the world’s 500 richest people.
Concerns Over Trump Media’s Valuation
Experts have long raised questions about Trump Media’s lofty valuation. The company has faced criticism for its financial fundamentals. It generates little revenue and has struggled to capture significant market share in the social media space.
“If this wasn’t Trump, this thing would be trading at $1,” remarked Matthew Tuttle, CEO of Tuttle Capital Management. Analysts and investors alike have pointed out that the multi-billion-dollar price tag placed on Trump Media does not align with its actual financial performance. The company’s losses and small revenue streams make it a risky investment.
Political Influence on Trump Media Shares Price
Beyond financial concerns, political factors have likely influenced the shares of Trump Media to slide. Analysts have noted that Trump’s fortunes, both politically and financially, are closely linked to the company’s success. Since President Joe Biden announced his withdrawal from the 2024 election and endorsed Vice President Kamala Harris, Trump Media has lost half its market value.
Tuttle explained, “This stock is entirely a Trump-gets-elected play. If Trump wins, this could be a viable company. But if he loses, I don’t know how this is a going concern.” The tight race between Trump and Harris in the polls has only added to investor anxiety about the company’s future.
Barry Diller and Reid Hoffman’s Skepticism
Criticism of Trump Media’s valuation is not new. Billionaire Barry Diller previously labeled investors who buy Trump Media stock as “dopes.” Diller’s skepticism mirrors concerns from LinkedIn co-founder Reid Hoffman, who called the company’s valuation “absurdly out of the realm of normal” during an interview. Both Diller and Hoffman are Democratic megadonors, further fueling political tensions around the stock.
Trump Media’s Limited Financial Strength
Despite its challenges, Trump Media still holds more than $300 million in cash and equivalents. This financial reserve could provide the company with opportunities to make acquisitions or fund its operations. However, the company generated just $837,000 in revenue during the last quarter, highlighting its weak financial position.
Trump Media has been attempting to build out its media empire, recently launching a streaming service called Truth+. The platform, available on iOS, Android, and web versions of Truth Social, aims to cater to a conservative audience. Still, the future success of the streaming business remains uncertain as the company continues to face financial pressure.
Upcoming Lock-Up Expiration
A looming concern for Trump Media is the upcoming expiration of a lock-up period that has prevented insiders, including Trump, from selling their shares. This restriction is set to end on September 20, 2024, according to company filings. Once the lock-up period expires, insiders may choose to sell their shares, which could further depress the stock price.
Selling a large number of shares could be particularly challenging for Trump, the company’s majority shareholder. Experts have cautioned that unloading a significant portion of his shares would likely lead to a dramatic decline in stock value.
Investor Caution and Market Outlook
Retail investors and Trump supporters should be wary of the stock’s volatility, according to market analysts. Tuttle warned that holding onto Trump Media stock based solely on political support for Trump is not a sound investment strategy. “I am a huge believer that you must keep politics and profits separate,” Tuttle stated. “If you’re holding onto this for dear life because you’re a Trump fan, that’s just stupid. You invest to make money.”
However, there is a possibility that Trump Media’s stock could recover, especially if Trump gains momentum in the political arena. Trump’s high-profile debate against Harris on Tuesday may offer a temporary boost to his company’s market performance. Investors are advised to keep an eye on political developments and any shifts in Trump’s electoral prospects.
Future of Trump Media Shares
Trump Media faces an uncertain future. The combination of declining stock value, weak financial fundamentals, and political unpredictability makes it a risky investment. While the company still has substantial cash reserves, its ability to generate sustainable revenue remains in doubt.
The upcoming expiration of insider selling restrictions adds another layer of risk. If Trump or other insiders decide to sell a significant portion of their shares, the stock could experience further downward pressure.
For now, Trump Media’s fortunes seem to be tied closely to Donald Trump’s political career. If he succeeds in his presidential bid, the company may have a path to recovery. However, if Trump’s political star dims, so too could the future of his media empire.
The drop in shares of Trump Media has erased billions in value, impacting both the company and Donald Trump’s net worth. As political uncertainty looms, the company’s future hangs in the balance. While Trump Media has made moves to expand its business, the challenges ahead are substantial. Investors should tread cautiously and consider the broader market conditions before making any decisions.
With the stock’s sharp decline and Trump’s political fortunes intertwined, the fate of Trump Media shares remains closely linked to the former president’s future success. Whether the company can bounce back or continues its downward trajectory will depend on both financial and political factors in the coming months.
Chart by Trading View
Source: CNN, CNBC
