Donald Trump’s social media company has lost a third of its value since its share price peaked during its stock market debut last week.
Trump’s stakes alone have fallen by more than $2.4 billion since his debut on March 26, amid claims that Truth Social is just a meme stock and new concerns about its ability to ever make money.
On Monday, shares – already down from their peak – fell another 21 percent after parent company Trump Media revealed in a filing that it lost $58 million in 2023 thanks to just $4 million in revenue. Bosses also admitted there would be no profits anytime soon.
“Truth Social was overvalued and that reality is dragging the stock down. Because the service has no clear path to profitability and revenues are meager, its high debut was unsustainable,” said Ross Benes, analyst at Insider Intelligence.
In its stock market debut last Tuesday, Truth Social parent company Trump Media shot to a $10.7 billion valuation at one point last week, when shares hit $79.38. Trump’s 58 percent take was worth $6.2 billion.
Shares fell $13.30, or 21 percent, to $48.66 at market close Monday
On Friday, Trump Media – when it had a market capitalization of more than $8 billion – had a price-to-sales ratio that was more than 50 times higher than that of chip maker Nvidia.
Donald Trump’s 58 percent stake in Trump Media is now worth more than $5 billion and his net worth has skyrocketed — but he may struggle to access the money
Last week’s surge was driven by enthusiasm from private buyers, including supporters of Trump, the presumptive Republican nominee in the 2024 presidential election.
Monday’s disclosure reversed that trend, sending shares down $13.30, or 21 percent, to $48.66. That lowered the company’s value to $6.6 billion.
Trump owns 78.75 million shares, which could result in a major windfall for the former president – if they stop falling in value.
At the stock’s peak last week its stake would have been more than $6.2 billion, but after the sell-off it is valued at $3.8 billion.
Trump is barred from selling or borrowing any of his stock for six months — and any attempt by him to change that agreement would likely lead to more sales.
“TMTG has had a huge build-up to hype and enthusiasm, but it is still a long way from being a true social media challenger to X (Twitter), Instagram, TikTok and other platforms,” said Michael Ashley Schulman, analyst at Running Points Capital.
Truth Social’s revenue was $4.13 million last year, compared to $1.47 million in 2022, the report said. By comparison, Reddit generated $800 million in revenue in 2023.
The latter has 73 million active users, while Truth Social only discloses the total number of signups, which comes to 8.9 million.
In its filing on Monday, TMTG said it has no plans to disclose key metrics typically used by peer companies.
The filing also said: “As of December 31, 2023 and 2022, management has significant doubt that TMTG will have sufficient resources to meet its obligations as they become due, including obligations associated with promissory notes previously issued by TMTG. ‘
The filing added that the company “expects to incur operating losses for the foreseeable future.”
Trump Media is also embroiled in a legal battle with co-founders Wesley Moss and Andrew Litinsky.
On Monday, a Delaware judge said he wanted the parties to set a hearing date this month to determine whether the two would get the 8.6% stake in the company they say they are owed.
Trump Media and the couple have sued each other in state courts in Delaware and Florida. The co-founders accused Trump Media of trying to improperly dilute their stake, while the company said they had failed to earn their shares and wanted to strip them of their ownership.