Former President Donald Trump’s social media venture, Truth Social, saw a significant financial downturn as its parent company, Trump Media & Technology Group (TMTG), faced its worst day on the stock market. The stock, which had seen a rapid and uncharacteristic rise over the past month, plummeted by 22.3% in a single day, reducing Trump’s stake by $1.3 billion. This sharp decline followed an unprecedented five-week rally that elevated TMTG’s value despite limited revenues and modest fundamentals.
Rapid Rise and Sudden Drop: The Volatility of TMTG’s Stock
Since going public in March, TMTG’s stock has been marked by extreme volatility, seeing drastic rises and falls with little connection to its actual business activities. Up until Wednesday, the stock had climbed consistently, a rally largely driven by speculation rather than financial performance or growth metrics. Some investors saw TMTG as a “meme stock,” where stock movements reflect online sentiment or speculative trading rather than company fundamentals. For TMTG, these dramatic movements are fueled in part by a perceived connection to Trump’s political fortunes and market reactions to the ongoing presidential election race.
On Tuesday, Trump’s stake in the company was valued at approximately $5.9 billion, but by the end of Wednesday’s trading session, that valuation dropped to $4.6 billion. The 22.3% loss in a single trading day marked the highest one-day decline since TMTG’s public debut, exceeding a previous drop of 21.5% on April 1.
The rapid rise in TMTG’s stock valuation from September 23 to late October can largely be attributed to Wall Street’s anticipation of a Trump return to the White House. With election day drawing closer, traders began associating the stock’s movements with Trump’s political prospects. During this time, the value of TMTG shares quadrupled, reaching $10.3 billion at its peak. This valuation momentarily exceeded even that of “X,” the social media platform formerly known as Twitter, which boasts over 70 million active U.S. users—about 100 times the 698,000 monthly active U.S. users that Truth Social claims.
Despite this surge, Truth Social’s user base and revenue fall well below those of major social media platforms, such as Elon Musk’s X or Meta’s Threads. The platform has generated approximately $1.6 million in revenue so far in 2024, while Paramount Global, a media company TMTG recently surpassed in market value, has reported over $14 billion in revenue this year. As Dan Ives, senior equity analyst at Wedbush Securities, put it, TMTG’s valuation seems questionable in light of its fundamentals: “Truth Social is a fraction of X and other social media platforms in terms of users, but with an election a week away, this stock has become a litmus test for some investors on the White House race.”
The recent market setback highlights the challenges TMTG faces as a meme stock susceptible to quick gains and losses. According to analysts, Wednesday’s 22.3% drop was driven by technical factors rather than any official announcement or business-related development. The stock’s recent surge had attracted a high volume of momentum traders—investors who seek quick gains based on recent stock movement rather than underlying value. When the stock failed to break through a technical “resistance” level, as observed by Matthew Tuttle, CEO of Tuttle Capital Management, many momentum traders sold off their shares, triggering a sharp decline.
Tuttle remarked, “The smarter traders know you make your money and get the hell out and leave the not-smarter traders holding the bag.” He explained that TMTG’s stock is difficult to short, given the high costs associated with borrowing shares. This factor further intensifies the stock’s volatility, as those betting against it face steep financing charges, making short-selling nearly impossible.
With the election drawing near, TMTG’s stock is likely to remain highly volatile, reflecting the company’s limited revenue and speculative valuation. Analysts caution that the stock’s connection to Trump’s political future creates both risk and unpredictability for shareholders. Despite boasting a valuation that peaked at over $10 billion, Truth Social’s revenue and user base are modest, raising questions about its potential to sustain long-term growth beyond political cycles.
Looking forward, TMTG faces the challenge of establishing a more stable user base and revenue stream if it hopes to compete with larger, more established social media platforms. While Truth Social’s connection to Trump provides a unique market position, it remains to be seen whether it can leverage this position into sustainable growth, especially given its limited reach compared to competitors like X and Threads.
TMTG’s recent downturn underscores the high stakes and volatility tied to its stock as investors respond to market sentiment and political developments. While Trump’s influence has propelled Truth Social’s stock to impressive heights, the platform’s modest fundamentals highlight the risks inherent in such speculative trading. As election day approaches, TMTG’s stock could see further fluctuations based on investor sentiment around Trump’s presidential run.
For investors, TMTG represents both a high-risk, high-reward venture tied to Trump’s political fortunes and a test case for the future of meme stocks. Whether Truth Social can sustain its current valuation—and achieve growth independent of political sentiment—remains uncertain. However, TMTG’s rise and fall illustrate the new dynamics of speculative trading and its impact on companies where market value is heavily influenced by external perceptions rather than core financial performance.
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