What you need to know about Trump Media’s stock debut

Trump Media and Technology Group soared so sharply on its first day of listing on the Nasdaq stock exchange on Tuesday that trading in the company’s stock, under the ticker DJT, had to be temporarily halted due to extreme volatility. Ta.

The company’s big public debut is especially important for its largest shareholder, former President Donald J. Trump, whose 60% stake is currently worth about $4.6 billion on paper.

Here’s what you need to know:

Wait, Trump media has value. how many?

After Tuesday’s trading, Trump Media’s market capitalization was nearly $8 billion. That makes it larger than companies like Mattel, Alaska Airlines, and Western Union.

It made just $3 million for most of last year. Why is it worth billions now?

Trump Media’s valuation is disproportionately high compared to other social media companies. The company took in $3.3 million in the first nine months of 2023, posting a $49 million loss, but its market value based on Tuesday’s stock price is nearly 2,000 times estimated annual revenue.

Trump Media’s flagship asset is Truth Social. It’s a digital platform Trump has described as an alternative to Twitter, using it to reach his supporters and attack his critics.

Investors sometimes justify the high valuations given to loss-making small businesses by citing expected growth or the expectation that other investors will continue to buy up the stock. Still, other social media companies trade at much lower price-to-sales ratios than Trump Media, with Reddit trading at about 10x, Meta at 7x and Snap at 6x, according to FactSet. Superstar high-tech stocks such as semiconductor manufacturers Nvidia and ARM have price-to-sales ratios of about 25 times.

Trump Media’s trading pattern has been similar to that of so-called meme stocks. Companies like GameStop and AMC Entertainment are among the companies that retail investors took to the dizzying heights of trading mania during the height of the pandemic.

How many users does Truth Social have?

Truth Social is relatively minor in the world of social media. The app has been downloaded 10 million times since its introduction in early 2022, including 3 million last year, according to data provider Sensor Tower. By comparison, Meta’s Threads had 171 million downloads from its July debut to November.

Last month, Truth Social had 5 million desktop and mobile visitors, according to data analytics firm Similarweb. That’s more than another alternative social platform, Gettr.com, which has 1.7 million visitors, but only a fraction of Facebook’s 3 billion monthly active users.

Trump’s Truth Social had 6.5 million followers, and his Twitter account had 87 million followers before his account was suspended.

Where did the company come from?

In early 2021, Andy Litinski and Wes Moss, former contestants on Trump’s reality show “The Apprentice,” spoke out after Twitter banned Trump in the wake of January’s presidential election. The plan was to create a conservative media giant centered around Trump. .6 Attack on the United States Capitol. Trump liked the idea, and the deal was signed a few weeks later. The company’s Trump Media & Technology Group installed Truth Social as Trump’s primary bullhorn in 2022.

The goal from the beginning was to take Trump Media public through a merger with a special acquisition purpose company (SPAC). The sole purpose of such a shell company is to raise funds from investors and merge with an operating business so that the entity becomes a publicly traded company.

After numerous delays, Trump Media merged with shell company Digital World Acquisition Corporation on Monday and began trading on Tuesday.

Who is buying stocks?

Trump Media’s shareholders are mostly individual investors rather than institutional investors. Many say they are buying the stock as a sign of support for Trump personally and for alternative social media platforms.

Mark Willis, 63, of Indian Trail, North Carolina, said: “I’m certainly thankful for President Trump, but it’s more about freedom of speech, which is the only country that isn’t heavily influenced by the government.” “I believe it’s a social media platform.”

Scott Luzak, a Nokesville, Va., graphic designer and another longtime shareholder, said he intended to profit from a huge jump in Trump Media’s stock price, but his investment was meant to support Truth Social and Mr. Trump. said.

“Even if I lose every penny, I’m going to fight to the end,” Leuchak said.

Will the Trump media be able to get Trump out of his legal turmoil?

Trump is, on paper, a richer man thanks to the Trump media. But using that money to resolve his legal problems may not be easy.

The Trump Media-Digital World merger includes restrictions that prohibit major shareholders from selling their shares or using them as collateral for loans for at least six months. But since Trump controls much of the Trump media and his allies are expected to form a majority of the new board, those restrictions could be waived at his request. be.

On the other hand, if Mr. Trump wanted to sell some of his shares in Trump Media, it could cause the stock price to fall or prevent it from rising.