Rama Krishna Sangem
Donald Trump is not just making waves among Republicans for his US presidential nomination later this year. But, also his Truth Social, a social media platform, too is a big success at the American stock markets. Trump founded Truth Social, after then Twitter (now X) banned him for its own reasons. Even after X boss Elon Musk invited him to join back on it, Trump refused and continued his Truth Social.
The Nasdaq warmly welcomed Donald Trump’s company, Trump Media & Technology Group, on its first day of trading. The stock soared by 50% just minutes after the market opened. The stock market returns came at an opportune time for Republican presidential candidate .
Trump Media’s key asset is Truth Social, a social media platform dubbed as Donald Trump’s alternative to Twitter that he uses for reaching supporters and attacking critics. Since its inception in early 2022, Truth Social app was downloaded 10 million times, including three million times last year, according to Sensor Tower. By comparison Meta’s Threads had 171 million downloads between its July debut and November.
From $ 3 million to $ 8.4 billion in 4 years
Thanks to this impressive debut, Trump’s net worth has risen by $4.6 billion. Trump owned social media company is now valued at $8.4 billion and larger than companies like Mattel, Alaska Airlines, and Western Union.
As the majority shareholder, Trump’s company has directors like his son, Donald Trump Jr., and other close allies from his time as president.
T rump will hold 78.75 million shares in Trump Media. This represents up to a 69% stake in the company, depending on how many DWAC shareholders redeem their shares. At a share price of $57.99 (before Wednesday Trade began), this stake was valued at nearly $6 billion on paper, before any dilution.
Many on the street are surprised by the dramatic turnaround of a company that reported less than $3.5 million in revenue over the first three quarters of 2023. Its reported losses exceeded that amount by more than tenfold.
What caused such a dramatic increase for a company that was worth only $3 million for most of last year? Trump Media’s valuation is disproportionately high compared with other social media companies. The company took in $3.3 million in the first nine months of 2023 and recorded a loss of $49 million, yet its market value — based on Tuesday’s share price — is nearly 2,000 times its estimated annual revenue. Experts believe, investors often justify high valuations for small companies operating at a loss due to expected growth or the belief that other investors will keep driving up the share prices.
Investor sentiment towards the company’s debut clearly showed high positivity towards Truth Social app platform, hoping it will significantly grow its market share enough for the firm to turn a profit. Many on the street may have opted to invest in Donald Trump’s presidential candidature which should automatically raise his company’s valuations.
Stock Market observers believe, it’s less a sign that Wall Street investors are buoyed by Trump’s stock market return than they are bullish on his chances of returning to the White House.
