Trump Media & Technology Group (TMTG) shares experienced significant volatility on Friday, erasing earlier gains driven by President Joe Biden's shaky performance against Donald Trump during the first presidential debate for the 2024 election. The stock, which trades under the ticker DJT, saw a sharp rise in premarket trading but ultimately ended the day down by 5%.
TMTG, the parent company of Truth Social, has had a tumultuous year in the stock market, driven largely by retail traders and speculation tied to Trump's political activities. On Friday morning, shares surged by over 11% in response to Biden's perceived poor performance during the CNN-hosted debate. However, the stock failed to maintain these gains, closing down 6% by the end of the day.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, commented on the speculative nature of TMTG's stock movements. "Fundamentally speaking, there is nothing much behind the Trump Media & Technology Group. The moves that we see are mostly speculative," she noted. Indeed, TMTG's financials reveal minimal revenue and substantial losses, raising questions about its high market valuation.
During the first quarter of this year, TMTG reported revenue of just $770,500, against an adjusted operating loss of $12.1 million. Despite these figures, the company was valued at approximately $6.7 billion as of Friday. The company's valuation is significantly bolstered by Trump's name and reputation, which heavily influence market sentiment.
Trading volumes surged after Thursday's debate, with nearly 14 million shares changing hands. Retail traders were net buyers, with buy orders outnumbering sell orders by a ratio of 1.6 to 1, according to J.P. Morgan data. This flurry of activity was driven by reactions to Biden's performance, which was widely criticized for its lack of assertiveness and moments of confusion.
Kevin Thompson, CEO of 9i Capital Group, attributed the stock's initial rise to concerns about Biden's capacity to lead. "It's truthfully not about Biden's ability to run the country but more about his capacity to run the country," Thompson told Newsweek. He suggested that investors were betting on Trump's chances to capitalize on Biden's perceived weaknesses.
Michael Ryan, a finance expert and operator of MichaelRyanMoney.com, highlighted the speculative nature of TMTG's stock price. "The platform's user growth is sluggish, and its financials clearly don't justify the stock price," Ryan said. "It's a bit like valuing your local lemonade stand as if it were Coca-Cola."
Political observers and Democratic donors expressed significant concern over Biden's debate performance. One major Democratic fundraiser described the event as a "disaster," telling CNBC, "This is terrible. Worse than I thought was possible. Everyone I'm speaking with thinks Biden should drop out."
The broader market for politically tied investments showed little movement in response to the debate. Exchange-traded funds (ETFs) linked to U.S. political parties saw modest gains. The Unusual Whales Subversive Democratic Trading ETF increased by 0.7%, while its Republican counterpart rose by 0.8%.
Christian H. Cooper, portfolio manager at Subversive Capital, which launched both ETFs, observed increased activity in the Republican-focused ETF, noting that flows were "modestly above average" following the debate.
As the election cycle progresses, TMTG's stock is expected to remain highly sensitive to political events and public appearances by Trump. Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, remarked on the unique nature of TMTG's stock, noting its direct tie to a presidential candidate's fortunes. "Truth Social is in a unique place in stock market history, as it's hard to remember one stock being so directly tied to any other presidential candidate to seek office," Beene said.
