Donald Trump's recent return to the social media platform X, formerly known as Twitter, appears to have backfired financially, at least for his own social media venture. Following a highly anticipated interview with Tesla CEO Elon Musk on Monday, shares of Trump Media & Technology Group (TMTG), the parent company of Truth Social, took a sharp downturn, reflecting growing investor unease about the platform's viability.
On Tuesday morning, TMTG's stock dipped 3%, trading at $24.07, a mere fraction above its all-time low of $22.50 since going public earlier this year. This decline follows a 5% drop leading up to Trump's reappearance on X, where he first made his return in August with a post featuring his mugshot. The stock has seen a steep decline from its post-IPO high of $66, raising questions about the company's future amid Trump's increasing engagement on competing platforms.
Truth Social was launched as a direct response to Trump's ban from X following the January 6, 2021, Capitol riot. The platform was intended to be a safe haven for Trump and his followers, promising a space free from the perceived censorship of mainstream social media. However, despite a recent increase in user numbers-16 million visitors in the past month, according to web analytics site SimilarWeb-Truth Social's audience remains a fraction of X's 200 million daily active users.
The decision to reengage with X, particularly for an extensive interview with Musk, has puzzled many observers. The event, which was plagued by technical difficulties and delayed for more than 40 minutes, was touted as a significant moment for both Trump and Musk. Yet, instead of bolstering Trump's own platform, the move seemed to divert attention away from Truth Social, raising concerns among investors about the platform's long-term viability.
Musk, who has publicly endorsed Trump, did little to dispel these concerns. The interview itself was marked by Musk's enthusiastic support for Trump, further cementing the perception that X, not Truth Social, is where Trump's true social media allegiance lies. This perception has contributed to the growing unease among TMTG investors, who fear that Trump's increasing activity on X could undermine Truth Social's unique selling proposition as the exclusive online home for the former president.
Adding to the unease, TMTG recently released its second-quarter earnings report, revealing a net loss of $16.4 million on revenue of just $837,000. These dismal financials have only fueled concerns that Truth Social is struggling to find its footing in an increasingly competitive market. The company's stock price, which has been on a steady decline, reflects these worries, with many investors questioning whether the platform can survive in the long term.
Trump's actions have not gone unnoticed by market analysts, who point out the inherent conflict of interest in his dual roles as both the figurehead of Truth Social and an active participant on its main competitor's platform. "Trump's engagement on X sends a confusing message to his investors," said one analyst who wished to remain anonymous. "It's as if he's saying, 'I don't believe in my own product enough to use it exclusively.' That's a red flag for anyone holding TMTG stock."
The implications of Trump's return to X extend beyond just stock prices. With the six-month lockup period for Trump's shares in TMTG set to expire in September, there is speculation that Trump could begin selling off his stake in the company. Such a move would likely cause the stock to plummet further, potentially wiping out any remaining value for shareholders. This possibility has led some to wonder whether Trump's recent actions are part of a larger strategy to maximize his personal gain at the expense of his investors.
Despite these concerns, there remains a dedicated base of Trump supporters who continue to invest in TMTG, driven by their loyalty to the former president rather than the company's financial performance. This "meme-stock" mentality, similar to the fervor seen with stocks like GameStop and AMC, has kept TMTG's stock afloat even as the company's financial outlook grows increasingly bleak.
However, as Trump's involvement with X deepens, the sustainability of this support is uncertain. If Trump chooses to cash out his shares in TMTG, it could trigger a mass exodus of investors, leaving the platform's future in jeopardy. For now, Truth Social's survival seems to hinge not on its business model or user growth, but on the whims of its founder and his unpredictable relationship with the broader social media landscape.
