Shares of Donald Trump’s social media company plunged 21% on Monday, erasing gains since going public last week, after it disclosed a multimillion-dollar loss and said it would struggle to repay future payments. financial liabilities.
Trump Media & Technology Group said in a filing it would lose more than $58 million in 2023, sending its shares tumbling less than a week after the parent company of Truth Social went public in a high-profile blank check merger .
The stock soared in its debut on March 26, closing at nearly $58 a share, driven by enthusiasm from retail buyers, including supporters of Trump, the likely Republican nominee in the 2024 presidential election. But Monday’s disclosure reversed that trend, sending shares down $13.30, or 21%, to $48.66.
Insider Intelligence analyst Ross Benes said: “Truth Social is overvalued and reality is weighing on the stock. Its high IPO comes as the service has no clear path to profitability and revenue is meager. It’s unsustainable.”
Trump owns 78.75 million shares, which could provide the former president with a huge windfall, depending on the value of the shares. At the stock’s peak last week, his stake would have been more than $6 billion, but after the sell-off, the stock was valued at about $3.8 billion. Trump is prohibited from selling or borrowing any of his shares for six months, and any attempt by him to change that agreement could trigger more selling.
Even with the stock’s decline, its market capitalization is still over $6 billion, compared with $8 billion for social media platform Reddit.
Running analyst Michael Ashley Schulman said: “TMTG has made huge strides in terms of hype and enthusiasm, but is still far away from becoming a truly massive social media platform like X (Twitter), Instagram, TikTok and other platforms. Media challengers still have a long way to go.” Dian Capital.
Truth Social said revenue last year was $4.13 million, up from $1.47 million in 2022. By comparison, Reddit’s 2023 revenue is $800 million.
The latter has 73 million active users, while Truth Social only disclosed its total number of registrations, which stood at 8.9 million. TMTG said in Monday’s filing that it has no plans to disclose key metrics commonly used by similar companies.
“Management has doubts as of December 31, 2023 and 2022 that TMTG will have sufficient funds to repay its debt obligations as they mature, including liabilities related to promissory notes previously issued by TMTG,” the company said.
Trump Media is also embroiled in legal battles with co-founders Wesley Moss and Andrew Litinsky. On Monday, a Delaware judge said he wanted both sides to set a hearing date this month to determine whether the pair should receive the 8.6% stake in the company they claim they are owed.
Trump Media and the two have sued each other in Delaware and Florida courts. The co-founders accused Trump Media of trying to improperly dilute their shares, while the company said they failed to win the shares and wanted to strip them of ownership.
