Trump Media & Technology Group, the company behind the social media platform Truth Social, saw its stock jump over 11% on Wednesday morning as it attempts to recover from a steep sell-off that has plagued the stock since mid-July. The rise in share price brought some much-needed relief to the company, which had faced significant declines after restrictions on insider selling expired last week, allowing key stakeholders to offload their shares.
Shares of Trump Media, which is majority-owned by former President Donald Trump, surged to $14.10 by mid-morning after closing more than 5% higher on Tuesday. The gains marked a brief reprieve following months of losses that have erased billions in market capitalization for the company. At its lowest point this week, Trump Media shares were trading at their lowest levels since the company went public through a merger with a blank-check firm.
The recovery comes at a critical time for the company, which operates in a challenging market environment. While the stock's recent upward movement may provide some optimism, analysts caution that the company remains overvalued compared to its financial performance. Trump Media posted only $837,000 in revenue in its most recent quarter, far short of the level of profitability that would justify its current market capitalization of more than $2.5 billion.
Some experts attribute the recent rebound in stock price to the trading behavior of retail investors, many of whom view the company's fortunes as closely tied to Trump's political prospects. The former president, now the Republican nominee for the 2024 election, maintains a substantial stake in the company, reportedly worth around $1.6 billion. His public statements have also influenced the stock's movements, particularly his declaration on September 13 that he does not plan to sell his shares, which seemed to reassure some investors.
Trump Media's stock had experienced a surge in mid-July after Trump narrowly survived an assassination attempt at a campaign rally, an event that briefly boosted his poll numbers. The stock rallied alongside these political developments, but soon began a dramatic decline, especially after Vice President Kamala Harris replaced President Joe Biden as the Democratic candidate in the 2024 election. Between July 15 and this week, the stock lost 70% of its value, signaling the volatile nature of investor sentiment surrounding the company.
Adding to the pressure on Trump Media was the expiration of lockup agreements, which prevented key insiders, including Trump himself, from selling their shares. While Trump has stated he will hold onto his stake, market watchers are focusing on other major shareholders, including Patrick Orlando and United Atlantic Ventures, who own about 11% of the company. So far, no insiders have disclosed significant share sales, but trading volume has surged, with an average of $275 million worth of shares changing hands daily since the insider restrictions were lifted.
Despite the recent uptick in its stock price, Trump Media still faces significant challenges. The company's current valuation is seen by many as wildly disproportionate to its financial performance. Its market cap, which once ballooned to nearly $10 billion, is now supported by a business with revenue comparable to just two Starbucks locations. At its current valuation, the company's stock is trading at an extraordinary 700 times its revenue, far exceeding even the most high-profile tech companies like Nvidia, which trades at a multiple of 31 times revenue.
The company's stock price has become a speculative bet for retail investors hoping that Trump's political fortunes will buoy the company. However, as the election season progresses, investors remain cautious, keeping a close eye on the broader economic environment and the company's ability to turn around its weak revenue performance.
