The debut of Donald Trump’s social media company on the Nasdaq saw a remarkable surge of nearly 50% in its share price on the first day of trading. The impressive performance not only boosted the value of Trump’s substantial holdings in the company but also rewarded the smaller stakes held by supporters who invested in a show of allegiance to the former president.
Digital World Acquisition Corp., a blank-check company, acquired Trump Media & Technology Group Corp. on Monday, paving the way for Trump Media, the entity behind the Truth Social platform, to replace Digital World on the Nasdaq stock exchange.
Before trading commenced, Trump Media boasted a market valuation of approximately $6.8 billion. However, with the substantial gains witnessed in the share price during the initial trading session, this valuation is expected to experience a significant uptick. Traded under the ticker symbol “DJT,” the shares surged by 47% to $73.50 as of 9:55 a.m. ET. Notably, Trump himself holds close to a 60% ownership stake in the company.
A considerable portion of Trump Media’s investors comprises individuals seeking to express their support for Trump or hoping to capitalize on the excitement surrounding the venture, rather than institutional investors. The stock of Digital World had more than doubled earlier this year as investors anticipated the successful completion of the merger.
However, investors in Trump Media may encounter challenges ahead, primarily due to the company’s uncertain path to profitability. In the first nine months of the previous year, Trump Media incurred a loss of $49 million, with meager revenue of $3.4 million and significant interest expenses amounting to $37.7 million. The company has acknowledged the inherent risks associated with new social media platforms and anticipates ongoing losses in its operations for the foreseeable future, factors that investors should consider.
Truth Social, the flagship platform of Trump Media, was launched in February 2022, following Trump’s suspension from major social media platforms such as Facebook and Twitter in the aftermath of the January 6 Capitol riot. Trump has expressed optimism about Truth Social’s performance, describing it as “hot as a pistol” and “doing great.”
However, despite Trump’s positive outlook, Trump Media has yet to disclose Truth Social’s user metrics. Research firm Similarweb estimates that Truth Social had approximately 5 million active users across mobile and web platforms in February. While this figure pales in comparison to industry giants like TikTok and Facebook, it surpasses that of other alternative tech platforms like Parler and Gettr.
In addition to competition in the social media landscape, Trump Media faces risks associated with its heavy reliance on the popularity and presence of President Trump himself. The company has acknowledged that any limitation or discontinuation of Trump’s association with the company, especially in light of his political aspirations, could significantly disadvantage the company.
As Trump Media embarks on its public journey, investors will closely monitor its progress amidst the evolving dynamics of the social media landscape and the broader political environment.
