There was a 20%+ decline in the shares of Donald Trump’s social networking company, which was listed under the DJT ticker less than a week ago.

The decline follows the announcement by Trump Media & Technology Group that it lost around $60 million in sales last year despite only making about $4 million.

According to Bloomberg, the former president’s net worth decreased by $1 billion as a result of the price decline. Following a spike in shares last week, the company’s valuation reached $11 billion.

Experts cautioned that Truth Social, the company’s primary product, is losing subscribers and losing money, therefore the stock was certain to crash.

The price surge evoked memories of the “meme stock” frenzy of the epidemic era, when the stock values of companies like GameStop and AMC skyrocketed despite the weakness of their core operations, like as revenue.

Meme stocks are those that suddenly become famous on social media and drive up prices as online investors want to purchase them.

The stock of Trump Media, which only generates revenue from Truth Social advertisements, dropped $13.30 to $48.66. However, they have increased by almost 200% so far this year.

Small-time investors, at least some of whom seem to be supporting the former president as his legal issues and the accompanying bills mount, have been the driving force behind the spike.

With a roughly 60% ownership stake in the business, Trump has the potential to profit billions of dollars when he cashes out his shares. However, he is legally prohibited from doing so for another six months unless the board of the corporation waives this restriction.

However, the business on which these investors are placing their money stated in a special filing on Monday that it “expects to continue to incur operating losses and negative cash flows from operating activities for the foreseeable future” to the Securities and Exchange Commission (SEC).

The financial report states that in 2023, Trump Media paid around $40 million in interest charges and $16 million in operating losses.

“Significant doubt” was expressed by the company’s management over its ability to “have sufficient funds to meet its liabilities as they fall due.”

About a year after the previous president was barred from Facebook and Twitter (now X) following the deadly riot at the US Capitol, Truth Social was established in February 2022.

While Trump’s accounts on both sites have now been reinstated, he has continued to use Truth Social as the major avenue for his social media activities.

However, his participation on the site hasn’t contributed to its increased popularity. The company has substantially fewer active monthly users than competitors, with similarweb estimates putting its user base at about five million.

Although Truth Social claims to have over 8.9 million sign-ups, it has chosen not to provide shareholders with frequently reported performance measures that could provide a more comprehensive understanding of the company’s operations.

(Adapted from BBC.com)

Categories: Economy & Finance, Entrepreneurship, Regulations & Legal, Strategy, Uncategorized