Trump Media & Technology Group (TMTG), the parent company behind Truth Social, faced a dramatic stock price drop this week, coinciding with the expiration of lockup agreements that had previously barred early investors, including former President Donald Trump, from selling their shares. Despite a brief rally on Tuesday morning, TMTG's stock had been in a downward spiral, plummeting over 32% in the past six days. The sell-off comes after months of declining stock performance, with TMTG shares losing more than 84% of their value since reaching a peak of $79.38 per share during its Nasdaq debut in March.
The lockup period, which ended last Thursday, had prevented Trump and other early investors from cashing in on their stakes. With the restriction lifted, speculation mounted about whether these investors would begin offloading their shares, further driving down the stock price. Trump, who owns nearly 57% of TMTG's outstanding shares, saw the value of his stake drop from billions of dollars earlier this year to around $1.5 billion on Tuesday. However, Trump has publicly vowed not to sell his shares, signaling his commitment to the company despite the financial hit.
The sell-off in TMTG stock is particularly concerning for investors, as it follows months of disappointing performance from Truth Social, the company's sole product. Truth Social, which was designed to rival Twitter as a platform for free speech, has struggled to generate significant revenue or attract new users. In recent fiscal quarters, the company has reported meager earnings, raising concerns about its long-term viability.
On Monday, TMTG stock hit an all-time low, closing at $12.15 per share-its lowest level since October 2021, when news first broke of a planned merger between TMTG and Digital World Acquisition Corp., a special purpose acquisition company (SPAC). This marked the sixth consecutive day of heavy selling, which came despite positive political news for Trump. A poll from The New York Times and Siena College showed Trump gaining ground in key battleground states like Georgia, Arizona, and North Carolina as he prepares for another presidential run.
While Trump remains a dominant figure in the Republican Party, the financial outlook for his media venture is far less promising. TMTG has yet to reveal concrete metrics about its business performance, including revenue, user growth, or earnings projections. According to analysts, this lack of transparency has caused financial professionals to steer clear of the stock, leaving it vulnerable to market volatility.
A closer look at TMTG's financials reveals a challenging situation. The company is currently valued at $2.4 billion, but its annual sales are expected to come in well below $4 million. By applying a similar price-to-sales ratio as Reddit, analysts suggest TMTG's true market cap could be as low as $25 million. At the end of June, the company's total assets capable of generating future profits were valued at just $12.5 million.
Chamath Palihapitiya, a prominent tech investor known for his involvement in the SPAC boom during the pandemic, likened TMTG's stock to a "trading coin" that banks on Trump's brand recognition rather than traditional financial fundamentals. "It's effectively a trading card via a stock," Palihapitiya said during an episode of the All-In podcast, highlighting the speculative nature of TMTG's market value.
The recent expiration of the lockup period has added to the pressure on TMTG's stock, as investors grow increasingly skeptical of the company's ability to turn around its fortunes. Despite Trump's assurances that he will not sell his nearly 115 million shares, other early investors are expected to cash out, further driving down the stock price. Any such sales would trigger disclosure requirements with the U.S. Securities and Exchange Commission, but as of Tuesday morning, it was unclear whether any had occurred.
In the face of mounting financial pressures, Trump has sought alternative ways to generate cash. Last week, he unveiled a new merchandising venture: selling one-ounce silver coins embossed with his face for $100 each, more than three times their intrinsic value. The move was seen by some as a bid to capitalize on his brand, even as the value of his media company continues to dwindle.
Meanwhile, Trump's political prospects appear to be on the rise. His improving poll numbers in key states have strengthened his position in the Republican primary race. However, his recent declaration that he would not run for president again if he loses in 2024 could further erode confidence in his ability to maintain influence within the GOP long-term. For investors, the uncertainty surrounding Trump's political future may contribute to the volatility of TMTG's stock, which has become increasingly detached from his political success.
