The stock prices of former President Donald Trump’s media company are experiencing significant drops. What does this mean for the future of the company?

Trump Media and Technology Group (TMTG) is a media company partly owned by former President Donald J. Trump (DJT). Only a week after publicly trading under the DJT ticker, it experienced a huge drop in its stock prices. This was a 21% drop, making its closing price for Monday $48.66. However, even with this drop, the company’s market cap and Trump’s stake are still roughly the same.

Just the week before, Trump Media, or DJT, increased by 14% on its saving day of trading on the Nasdaq. On its first day, it increased by a good 16%. In addition, the company recently went public after it merged with Digital World Acquisition Corp. (a shell company) after shareholders approved the deal. Digital World Acquisition Corporation is a special acquisition firm.

The 21% drop in its second week was quite surprising. Experts say that this drop was most likely caused by an updated regulatory filing, the 8-K filing. This filing reported the company to be suffering from significant losses and facing a lot of “greater risks” due to its association with the former president.
According to the filing, the net losses of Trump Media in 2023 nearly reached $6 million, and the losses are expected to continue.

The filing also reported that Trump Media paid about $40 million in interest expenses and $16 million in operating losses in 2023. Understandably, the shareholders were not happy with this news. Making matters worse, it doesn’t seem to be getting better anytime soon, as the closing price on Monday was $30 lower than the $79.38 high per share it hit when it became publicly traded.

In its initial valuation, TMTG was rated higher. According to analysts, it was valued highly because Trump’s political supporters bought the stock. However, they are not so pleased as Trump owns a part of the company, creating unique risks for them.
The 8-K filing also reported that TMTG “may be subject to greater risks than typical social media platforms because of the focus of its offerings and the involvement of President Trump.”

Trump’s numerous legal troubles are one of the possible causes of the negative impact on TMTG’s stock prices according to a more detailed annual report filed by the company.
The 10-K filing stated: “TMTG’s success depends in part on the popularity of its brand and the reputation and popularity of President Trump. Adverse reactions to publicity relating to President Trump, or the loss of his services, could adversely affect TMTG’s revenues and results of operations.”

Trump Media’s CEO David Nunes released a statement to CNBC that might not have been totally transparent. He wrote, “We are excited to be operating as a public company and to have secured access to capital markets.”
The statement continued, “Closing out the 2023 financials related to the merger, Truth Social today has no debt and over $200 million in the bank, opening numerous possibilities for expanding and enhancing our platform. We intend to take full advantage of these opportunities to make Truth Social the quintessential free-speech platform for the American people.”

Trump Media and Technology Group is the parent company of Trump’s social media platform, Truth Social. They launched it in 2022 after Twitter (now X) and Facebook banned Trump from the platforms due to his involvement in the 2021 US Capitol attack.
Although he later got his membership reinstated on both platforms, Trump majorly uses Truth Social as his main social media platform.

According to Truth Social, the platform has more than 8 million users who have signed up for its service. However, they have refused to share the performance metrics that would give shareholders a better overview of how it operates.
Therefore, most people do not believe this is true. Analytics firm Similarweb estimates a figure below half a million active users as of February this year.

Josh Marshall, the founder of Talking Points Memo, reacted to this news by saying some things in a thread on X. “This company has zero actual value. The best case for its value is that they haven’t actually tried to build the user base,” he wrote. “So it’s as though it was still a prospectus with an amazing strategy. But in fact, it’s been around for two years and has an INSANE amount of publicity behind it. Again, this company has no value. Or I guess it is better to say that whatever value it may have is premised on the say-so of Donald Trump.”

Todd Landman, a professor of political science at the University of Nottingham in the UK, believes that the value of Truth Social will go up if it adds more users. “The potential success of Truth Social (and the DJT stock) thus rests on attracting a much larger volume of users and providing an attractive blend of content, functionality, and services,” the professor said to Newsweek. ”Whether its offer proves attractive is very much an open question.”

Could this be the end of the line for TMTG? US account firm BF Borgers CPA PC raised this question while saying that TMTG could continue to lose more over the next couple of months due to a lot of doubt about its ability. Trump’s net worth is also suffering losses thanks to this and his numerous legal battles.