Market correction: Trump stock tumbles after buoyant debut

Donald Trump’s media group has suffered a bruising retreat, denting the Republican presidential candidate’s wealth as he faces legal challenges.

Donald Trump holds 57.3pc of the company, which was successfully merged into a shell company known as Digital World Acquisition last month. Picture: Getty Images/AFP

After a winning debut on Wall Street last month, Donald Trump’s media group has suffered a bruising retreat, denting the Republican candidate’s wealth as he faces legal challenges.

Since entering public markets on March 26, Trump Media and Technology Group has seen its market value plummet from around $US11 billion ($17bn) to less than $US4.5 billion.

That’s an unhappy reversal for the former White House inhabitant and current presidential candidate, who faces around a half billion dollars in civil court judgments if his appeals are unsuccessful.

Trump holds 57.3 per cent of the company, which was successfully merged into a shell company known as Digital World Acquisition last month; equity owners in such transactions are typically required to hold the stock for six months before cashing out.

TMTG’s ticker is “DJT,” Trump’s initials. The company’s principal asset is “Truth Social,” the social media platform launched for the ex-president after he was kicked off Twitter and Facebook in 2021 in the wake of the January 6 attack on the US Capitol.

Market watchers aren’t quite sure what to make of the stock’s trajectory.

“Nothing would surprise me about this stock’s trading,” said Matthew Kennedy, senior IPO Market strategist at Renaissance Capital. “It could jump to $US100 or drop to $US1 and I would be unfazed.”

Though far below its peak valuation, TMTG’s stock price is an anomaly in the sense that the company generated just $US4 million in revenues in 2023 and lost $US58 million, according to a securities filing.

“I can’t think of any companies that currently have such a wide gap between revenue and market cap,” Kennedy said.

To justify such a valuation, a company would normally be expected to produce significant growth and profitability in the near-future – scenarios that are considered highly unlikely, if not impossible.

“It’s very hard to tell any story that could justify a valuation, at today’s price,” said Jay Ritter, a finance professor at the University of Florida.

“There’s just no plausible story where that’s going to be happening,” Ritter said. “The media business has been on the decline. And with this company being so closely aligned with Donald Trump, he’s not going to live forever.”

- AFP