Donald Trump’s tiny social media empire has seen its extraordinary stock market rally wiped out by a steep sell-off.
Shares in Trump Media & Technology Group, owner of Truth Social, closed below $17 on Wednesday, reversing all their gains since the company’s rapid rise took hold in January.
The former president has been prohibited by a lock-up agreement from starting to sell shares in the firm until late September.
While his majority stake in the firm is still worth some $2bn on paper, its value has fallen dramatically from $4.9bn in March.
That same month, however, TMTG was valued at almost $10bn on the stock market.
Trump Media has, however, previously insisted that there is no “conceivable sign anywhere” that Trump plans to sell shares in TMTG.
After being banned from Twitter and then eschewing the platform once the ban had been lifted, Trump recently returned to X.
Digital World Acquisition Corp, a shell company, first announced plans to merge with TMTG and take Trump’s fledgling media firm public in October 2021.
Earlier this year, as Trump dominated the Republican primaries, and it became clear that TMTG would finally land on the stock market, Digital World’s stock was drawn center stage.
When Digital World and TMTG finally combined in March, it initially poured fuel on the fire.
A sharp sell-off has destroyed Donald Trump’s tiny social media empire’s incredible stock market rally.
Truth Social’s parent company, Trump Media and Technology Group, saw its shares close below $17 on Wednesday, wiping out all of the gains made since the company’s sharp ascent began in January.
A lock-up agreement prevents the former president from beginning to sell company stock until late September. His ownership of the company still has a $2 billion book value, but it is no longer worth the $4.9 billion it was in March.
TMTG is not expanding quickly as a company. Regulatory filings show that in 2023, it lost $58.2 million and only made $4.13 million in sales.
Furthermore, the platform Truth Social is expanding quickly. While TMTG has not disclosed the size of its user base, Similarweb, a research firm, estimated that in March, it had 7 point 7 million visits, compared to 6 point 1 billion for X, the former Twitter. On the other hand, TMTG’s stock market valuation was close to $10 billion that same month.
Following two civil trials, the former president may be liable for penalties totaling hundreds of millions of dollars, which would significantly reduce his personal wealth. Nonetheless, Trump Media has previously maintained that there isn’t a single “conceivable sign anywhere” that Trump intends to sell his TMTG shares.
Recently, Trump went back to X after being banned from Twitter and then abandoning the social media site once the ban was lifted. The platform’s owner, Elon Musk, conducted a long interview with him.
A brief but intense market surge in TMTG was caused by its conversion into a “meme stock,” one of a handful of stocks—the most well-known of which being the video game retailer GameStop—that shook Wall Street with sudden and erratic rallies.
Trump’s startup media company, Digital World Acquisition Corp., was initially going to go public in October 2021 after going public with a merger with TMTG. But a number of legal obstacles caused the process to stall.
Digital World’s stock gained prominence earlier this year when it was evident that TMTG would eventually list on the stock market and that Trump would win the Republican primary.
The number of shares that changed hands in Digital World’s trading volume increased at an exponential rate. Less than 100,000 shares were traded on one day in December, compared to 29.7 million shares traded on one day in January.
An upsurge in online memes encouraging regular investors to purchase in drove attention, much like other meme stocks. This was unique since a large number of the memes were being shared on Truth Social, a website run by the business that Digital World was about to go public.
In the beginning, the merger of Digital World and TMTG in March seemed to exacerbate the situation. But as GameStop and AMC Entertainment have demonstrated, these quick rallies usually culminate in a massive collapse from the peaks they reach.
