TrumpStop! Donald’s Truth Social value rockets to $8 BILLION even though a single McDonald’s makes more in a year… so is ‘DJT’ just a meme stock like GameStop?

Donald Trump’s social media platform Truth Social appears to have reached ‘meme stock’ status after reaching a staggering $8 billion valuation following its stock market listing this week.

That’s despite the fact that the company generated just $3.4 million in revenue in the first nine months of last year and posted a $49 million loss, SEC filings show.

For context, the average McDonald’s restaurant has sales of approximately $3.6 million.

At a valuation about 2,000 times its annual revenue, Truth Social parent Trump Media – trading under the ticker DJT – could be one of the most overvalued companies currently trading on the Nasdaq.

Typical price-to-sales ratios for companies vary by sector, but are 38, 13 and 10, respectively, for top tech stocks like Nvidia, Reddit and Meta, according to CNBC.

Trump Media’s astonishing valuation has led experts to call it a meme stock, whose value is determined not by the company’s performance, but by hype and sentiment.

“The action in DJT certainly brings back memories of the ‘meme stock’ rallies,” said Bret Kenwell, analyst at investment platform eToro.

Shares of Trump Media were down 6 percent to $62.09 on Thursday, but have continued to rise sharply over the past week. Donald Trump personally owns about 58 percent – ​​worth about $5.2 billion at that price.

He is now among the richest 500 people on the Bloomberg Billionaires Index.

While these shares could serve as a crucial means of funding his escalating legal bills, they could also be a difficult reserve to tap.

Questions are now being raised about whether Trump Media will be able to maintain its enormous valuation and, if so, what will come of it.

Why Are Trump Media Stocks Rising?

Trump Media is valued at $8 billion as investors pay about $60 for shares this week – and there are about 135 million outstanding.

Trump Media’s only real asset is Truth Social, the social media platform created after Trump was removed from X, Twitter, after the January 6 Capitol riot.

But investors aren’t buying the stock because they think Truth Social has a unique or promising business model.

The largely failed venture only attracts about 5 million active monthly users. By comparison, Elon Musk’s X sees 550 million.

Today, the platform is mainly used as a way for the former president to make statements and broadcast messages to his fans.

“Truth Social also missed its expected user base by an order of magnitude. It’s not a successful company. It’s not a company that seems to have a plan for success to make money,” Jordan Libowitz of Citizens for Responsible Ethics in Washington told DailyMail.com.

“It’s really just a meme.”

What is a meme stock?

Meme stocks became a household phenomenon in early 2021 after shares in video game retailer GameStop rose more than 1,800 percent on a surge in demand driven not by strong performance, but by internet virality.

That historic rally was powered by the online investment community Wall Street Bets hosted on social media platform Reddit.

The group is known for throwing its full force behind certain companies, buying up their shares and holding on to those assets through thick or thin.

Sometimes these investments are made for ideological reasons, but in many cases they are made to make a quick buck.

On the one hand, GameStop had nostalgic value for many community members because it was a dying retailer that reminded them of their youth. On the other hand, the rising stock price offered an opportunity to make some money.

In the case of DJT, investors seem to be largely ordinary people and not large institutions.

Buyers of the shares are a combination from those who want to support the Donald Trump brand, but also from those who think that if they buy Trump Media shares now, they might be able to sell them for a profit in the future.

For example, some investors think stocks will rise if Trump is re-elected president later this year. On the Wall Street Bets online forum, the term “Pump and Trump” is trending.

“It’s not really Truth Social, they’re investing in a potential future president of the United States,” Libowitz said.

“His net worth is determined by whether people buy or sell shares.”

eToro’s Kenwell said the volatile stocks offer the possibility of significant returns. “For obvious reasons, this is attractive to high-risk, high-reward speculators,” he said.

Can Trump Get Access to the Wealth?

Although the former president owns nearly 60 percent of Trump Media stock, his ability to liquidate and access the billions of dollars is limited.

Trump has been barred from selling his stake for six months because of SEC rules intended to give investors confidence that major shareholders won’t suddenly cash out.

However, there is a condition that allows the six-month rule to be waived with the approval of the Trump Media board.

It features his son Donald Trump Jr., as well as two former Trump administration officials Linda McMahon and Robert Lighthizer.

Alternatively, Trump may be able to borrow against his billions of dollars in stock, but lenders may not be particularly confident that Trump Media will maintain its current value in the future.

Finally, Trump may have the option to sell certain assets, such as Mar-a-Lago, to Trump Media. per column in the Wall Street Journal.

“Buying assets from the founder (of a company) is one of those things that is very difficult to guard against,” Dan Davies, a financial analyst and author of “Lying For Money,” told the paper.