Donald Trump adds billions to his fortune in rollercoaster Wall Street debut

Former president Donald Trump’s social media startup gained 16 per cent in its first trading day as a public company, after the most high-profile blank-check deal in years added billions to his fortune — at least on paper.

Shares of Trump Media & Technology Group Corp. rose as much as 59 per cent before paring gains, closing at $US57.99 each. The trading after the closing of the merger with Digital World Acquisition Corp. values the unprofitable company at $US7.9 billion ($12.1 billion), capping an eye-popping meme stock run, and providing a potential windfall for Trump as he faces a mounting series of legal and financial woes.

Shares in Donald Trump’s media company have soared on debut.Credit: AP

Trump’s nearly 60 per cent stake in the company behind Truth Social is valued at around $US4.5 billion but may ultimately be worth more than $US6 billion, based on its filings with the US Securities and Exchange Commission. However, he can’t sell the stake immediately due to a six-month lock-up agreement, hindering his ability to monetise the shares and ease his present cash crunch. As much as $US1.6 billion of that paper wealth is also dependent on shares meeting performance requirements.

The stock created such a frenzy that Nasdaq briefly halted its trading just two minutes after it began for the day. It was up more than 50 per cent in afternoon trade before slumping late in the session.

Trump’s windfall has now landed him for the first time on the Bloomberg Billionaires’ index, a list of the world’s 500 richest people. He sits 422nd with a net worth of $US6.53 billion.

Many of Trump Media’s investors are small-time investors either trying to support Trump or aiming to cash in on the mania, instead of big institutional and professional investors. Those shareholders helped the stock of Digital World more than double this year in anticipation of the merger going through.

Truth Social launched in February 2022, one year after Trump was banned from major social platforms including Facebook and X, formerly Twitter, following the January 6 insurrection at the US Capitol. He’s since been reinstated to both but has stuck with Truth Social.

On Truth Social, #DJT and the ticker of Digital World were two of the top trending topics in posts. Truth Social users were posting about being shareholders or seeking tips on how to buy shares.

One user urged conservatives to “get behind the DJT stock and sent it over $USUS100 per share” to “drive the liberals insane!” Another declared: “Get yourself a piece of #DJT stock if your (sic) a true MAGA supporter.”

A day before, Trump Media CEO Devin Nunes, a former House Republican, said, “As a public company, we will passionately pursue our vision to build a movement to reclaim the Internet from Big Tech censors.”

Despite the enthusiasm, investors could experience a bumpy ride. For one, they’re betting on a company with vague prospects of turning a profit. Trump Media lost $US49 million in the first nine months of last year, when it brought in just $US3.4 million in revenue and had to pay $US37.7 million in interest expenses.

The stock created such a frenzy that Nasdaq briefly halted its trading just two minutes after it began for the day.Credit: AP

In a recent regulatory filing, the company cited the high rate of failure for new social media platforms, as well as the company’s expectation that it will lose money on its operations “for the foreseeable future” as risks for investors.

Research firm Similarweb estimates that Truth Social had roughly 5 million active mobile and web users in February. That’s far below TikTok’s more than 2 billion and Facebook’s 3 billion — but still higher than other “alt-tech” rivals like Parler.

However, Trump Media has said it doesn’t keep track of some numbers that rivals use as key measures of their performance, such as average revenue per user or active user accounts. It says it wants to focus on the long-term instead of “short-term decision-making.”

For the long term, though, sceptics see struggles ahead for a company that’s estimated to have far fewer users than rivals in a business where gaining a critical mass is key.

“I think there is a possibility of, sooner or later, the stock price falling by 95 per cent,” said Jay Ritter, a professor and expert on initial public offerings of stock at the University of Florida’s Warrington College of Business.

Trump would undoubtedly disagree with that assessment. On Monday, he told reporters that “Truth Social is doing very well. It’s hot as a pistol and doing great.” On Tuesday, he posted “I LOVE TRUTH SOCIAL, I LOVE THE TRUTH!,” on the platform.

So far, investors’ bet on the former president and Truth Social have paid off. But the company has acknowledged that there are risks associated with Trump’s outsized influence.

Trump Media, which is based in Palm Beach, Florida, said in a regulatory filing that it “is highly dependent on the popularity and presence of President Trump.” If the former president were to limit or discontinue his relationship with the company for any reason, including due to his campaign to regain the presidency, the company “would be significantly disadvantaged.”

Acknowledging Trump’s involvement in numerous legal proceedings, the company noted that “an adverse outcome in one or more” of the cases could negatively affect Trump Media and Truth Social.

Another risk, the company said, was that as a controlling stockholder, Trump would be entitled to vote his shares in his own interest, which may not always be in the interests of all the shareholders generally.

Bloomberg, AP, Reuters

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