Business Essentials for Professionals


Trump's Media Business Made A Great Wall Street Debut, Valued At About $8 Billion

Trump's Media Business Made A Great Wall Street Debut, Valued At About $8 Billion
In their Nasdaq launch, shares of Donald Trump's Trump Media & Technology Group shot up as much as 59%, spurred on by the former US president's fans and offering him a possible windfall as he struggles with the expenses of many legal challenges.
TMTG's market capitalization exceeded $10 billion on an undiluted basis at its session high of $79.38 a share. This is an astonishing figure for a business that announced an operating loss of $10.6 million for the first nine months of 2023 on revenue of just $3.4 million.
With a 16% gain at $57.99, the stock closed at a nearly $8 billion valuation for the company.
The last estimate for Trump's controlling ownership in TMTG was roughly $6 billion, but he may not be able to sell or borrow against it for six months due to lock-up limitations.
Following a delayed and unsuccessful merger with blank-check company Digital World Acquisition Corp. in 2021, TMTG made its stock market debut.
Since the announcement of the merger, Digital World and the recently listed TMTG have increased in value by about 600% combined. This has solidified TMTG's reputation as one of Wall Street's "meme stocks," which are well-liked by retail investors and whose movements can be influenced by social media posts.
"The valuation of the business is rich relative to its underlying fundamentals, but I would not get in front of it in the near term," said Thomas Hayes, chairman of Great Hill Capital.
"This valuation may be more of a proxy on the enthusiasm of supporters for Trump than a reasonable estimate of underlying business prospects."
Just after the opening bell, trading in the shares under the new ticker "DJT" was momentarily suspended because of volatility.
It was the most trending stock according to Stocktwits, a social networking and trading platform geared towards retail traders.
Following the completion of the transaction, shares of Digital World Acquisition Corp., now known as TMTG, had increased by more than 35% on Monday.
In his quest for the US presidency, Trump is being prosecuted in four separate criminal cases and has had difficulty raising money for his campaign and legal defence.
Supporters of Trump can also wager on the corporation's potential for political comeback, as seen by the nearly threefold increase in value of shell company Digital World Acquisition's shares this year.
Investors who were shorting the stock suffered losses as a result of TMTG's increase on Tuesday. According to analytics company S3 Partners, short sellers' paper losses from their holdings in TMTG and Digital World Acquisition this year were $158 million.
"Today’s price action and valuation are completely out of kilter with the underlying business and its prospects," said AJ Bell investment analyst Dan Coatsworth.
Additionally, the agreement will provide $300 million in funding for Truth Social, a social media site controlled by TMTG.
When Truth Social was first introduced in February 2022, it aimed to take advantage of the fact that Trump's accounts were blocked on several social media sites, including Meta Platforms' accounts and Twitter (now X). It also catered to users' perceptions that conservative viewpoints are suppressed on other social media sites.
As per a regulatory filing, Truth Social had 8.9 million sign-ups in February. According to the most recent official data available, as of June 2022, X had 238 million daily active members, compared to 2.1 billion on Facebook and 73 million on Reddit.
Truth Social was valued at almost $1,000 per newly registered member at the peak of Tuesday's rise, vs $147 for Reddit, $80 for X, and $46 for Snapchat.
According to a filing made by Digital World last month, depending on how his presidential campaign plays out, Trump might sell his interest in Truth Social and stop being involved in its operations.
The U.S. Department of Justice has been looking into the blank-check company since it signed the merger agreement with Trump's business in October 2021.

Christopher J. Mitchell

Markets | Companies | M&A | Innovation | People | Management | Lifestyle | World | Misc