What a difference a week has made—at least for the value of the owners of Truth Social, the social media platform launched by former President Donald Trump.
Trump Media & Technology Group, which debuted on the Nasdaq Composite Index on March 25 under the ticker “DJT,” saw its stock price lose $4 billion. Shares of DJT, whose primary asset is the Truth Social platform, fell $13.30, or 21%, to $48.66 on Monday—below its opening price last Monday of $49.90 per share. It represents a 39% plunge from the stock’s high of $79.38 on March 26.
The former president, who owns 57% of the newly public company, lost $2.5 billion on paper with his stake now worth $3.8 billion, down from the $6.3 billion of last week.
However, such volatility isn’t unique to DJT.
“Some of the major tech companies such as Meta and Apple have faced significant stock fluctuations over the past few years—losing or gaining billions in a day,” explained social media analyst Greg Sterling, co-founder of Near Media.
“Massive losses aren’t ‘common’ but they’re not unprecedented either. Trump is so identified with Truth Social and is such a polarizing figure that his visibility, public comments, and behavior will necessarily impact the stock. During the IPO investors were betting on a resurgent Trump and the idea that Truth Social would similarly ‘benefit,'” added Sterling. “The stock decline is thus simply a reflection of more rational thinking—the news that the site is unprofitable and may continue to be so for a long time to come.”
As a result, it could be a long time before Truth Social can recover, but the problems run far deeper than just the stock price.
“This was a platform with revenue in the small company range and losses that aren’t sustainable,” suggested technology industry analyst Rob Enderle of the Enderle Group.
“What happened here is the stock was overhyped, this should be penny stock with this level of financial performance and risk. But those who bought at the stock high will likely be upset shortly when they realize the valuation is unlikely to recover,” Enderle continued.
The platform may simply lack the user base for it to see any kind of short-term rebound.
“Truth Social has a tiny user base—roughly one million active monthly users according to SimilarWeb—compared to other U.S.-based social networks,” added Sterling. “Obviously, there are legitimate investor concerns about growth.”
An Inconvenient Truth Social
While it is likely to happen, if it is found that the stock was artificially overvalued, it could spell further legal trouble for the former president.
“Typically, when a stock price is this much higher than any legitimate valuation the SEC takes interest and they aren’t known for having a sense of humor when it comes to misleading investors or pumping up a stock price well beyond reasonable value,” suggested Enderle. “Now, we have seen bubbles over crypto and internet stocks in the past, but the bloom has been off the social media market for some time and Truth Social massively underperforms peers like Reddit which had a similar valuation but had revenues and profits that supported that valuation.”
Even if there isn’t an SEC investigation, Enderle said all the negative press could allow some to cash in if they played their cards right.
“I understand the number of people shorting this stock is, in and of itself, a record,” Enderle quipped.
If that is true, there isn’t likely to be a replay of the now infamous GameStop short squeeze—or perhaps Donald Trump could once again prove he has mastered the art of the comeback. We’ll just have to see how this all plays out.
