Donald Trump's recent election victory has had a significant impact on the stock market, with shares of Trump Media & Technology Group (DJT), the parent company of his social media platform Truth Social, experiencing extreme volatility. On Thursday, DJT shares plunged over 13% in early morning trading, erasing the gains made on Wednesday following Trump's win over Vice President Kamala Harris. The reversal highlights the stock's recent erratic performance, which has been closely tied to Trump's political fortunes.
On Wednesday, DJT shares surged 5.9% as markets reacted to Trump's victory, with early trading showing an impressive 60% spike. However, this momentum quickly reversed, reflecting what strategists have described as a "buy the rumor, sell the fact" phenomenon surrounding Trump's election prospects. Matthew Tuttle, CEO of Tuttle Capital Management, explained that DJT's trajectory was driven by speculative trading based on Trump's potential return to the White House. "I would imagine that the day after him winning, you'd see this come down," he noted in a recent interview with Yahoo Finance's Catalysts.
The company's stock has had a tumultuous history, often behaving more like a meme stock than a traditional equity. Interactive Brokers' chief strategist, Steve Sosnick, noted DJT's unpredictable nature: "It was volatile on the way up, and when a stock is that volatile in one direction, it has a tendency to be that volatile in the other direction." The past week exemplified this sentiment, with shares rising nearly 120% over the past month before taking a sharp downward turn.
Trump Media's fundamentals have long been questioned by analysts, who point to the company's struggles to gain traction against established social media giants. Despite Trump's reinstatement on major platforms such as Facebook and X (formerly Twitter), Truth Social has faced challenges in attracting and retaining a substantial user base.
The company's financials further illustrate these challenges. On Tuesday, DJT reported a net loss of $19.25 million for the third quarter, narrowing from a $26.03 million loss in the same period last year. Revenue fell slightly to $1.01 million from $1.07 million year-over-year, marking a 23% decline in revenue over the past nine months compared to the previous year. The lackluster earnings report underscores the difficulties DJT faces as it attempts to position itself as a viable competitor in the social media landscape.
Shares of DJT have been subject to wild swings since the company's market debut, which was facilitated through a blank-check merger in March. Investors have often focused more on the company's perceived connection to Trump's political influence rather than its financial performance. This speculative trading behavior has made DJT a barometer for Trump's political fortunes, amplifying the stock's volatility.
Trump Media's challenges extend beyond market speculation and financial losses. Last month, the company revealed that its Chief Operating Officer had stepped down, further contributing to uncertainty about its leadership and direction. Despite these headwinds, Trump retains a 60% stake in the company, valued at approximately $4.3 billion based on Wednesday's closing price.
