Trump Media & Technology Group, the company behind Truth Social, experienced a sharp 22.3% drop in its stock price on Wednesday, marking its worst single-day loss since it went public in March.
This setback, which followed a five-week surge that had quadrupled the company’s value, effectively erased $1.3 billion from Donald Trump’s net worth, reducing his stake from $5.9 billion to $4.6 billion by the day’s end. This decline reflects the unpredictable and meme-stock-driven nature of Trump Media’s valuation, which has spiked and tumbled regardless of traditional business metrics.
Since late September, the company’s stock saw a near-constant rally, driven largely by investor speculation that Trump’s political momentum might boost the platform’s visibility and profitability. This surge briefly valued Trump Media at $10.3 billion as of Tuesday, putting it ahead of Elon Musk’s social network X (formerly Twitter), despite X’s active user base of around 70 million US users dwarfing Truth Social’s 698,000.
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Truth Social also has a smaller footprint compared to Meta’s Threads, which boasts nearly 20 times its user base. Yet the limited user engagement and modest $1.6 million revenue generated by Trump Media this year did not deter a speculative increase in valuation, likely fueled by its meme stock status.
Analysts are puzzled by Trump Media’s meteoric valuation, given its fundamentals. Dan Ives, a senior equity analyst at Wedbush Securities, called the valuation “a head-scratcher,” comparing it to meme stocks like GameStop and AMC, where market value is often detached from business realities.
“Truth Social is a fraction of X and other social media platforms in terms of users,” Ives explained, “but with an election a week away, this stock has become a litmus test for some investors on the White House race.”
Experts cite technical factors and loss of momentum as drivers of Wednesday’s selloff. The inability of the stock to break through resistance points on its upward climb was a warning sign, according to Matthew Tuttle, CEO of Tuttle Capital Management.
“The smarter traders know you make your money and get out,” Tuttle noted. The recent surge was also bolstered by the high costs of borrowing shares to short the stock, making it difficult for investors to bet against it. Tuttle described these financing costs as “completely insane,” creating an environment where the stock’s volatility is virtually unchecked.
Ultimately, Trump Media’s valuation reflects the speculative nature of meme stocks, where traditional revenue metrics are overshadowed by investor sentiment, often tied to high-profile events or figures. This latest downturn highlights how fragile that valuation can be, especially without substantive business growth or a clear user engagement strategy to back it up.
Trump’s Shift to X
The volatile performance of TMTG stock has become closely tied to former President Donald Trump’s political activities and social media presence.
When Truth Social launched, it was positioned as Trump’s primary social media outlet after his ban from X. This unique role as Trump’s sole social media presence became a driving factor for its market value, making the platform an essential vehicle for his followers and supporters.
However, Trump’s recent decision to re-engage on X, seeking to leverage its much larger user base for campaign visibility, has undermined this exclusivity, contributing to Truth Social’s diminishing appeal. Since he posted his first message on X in over two years this August, TMTG stock has seen dramatic fluctuations and, ultimately, significant declines. This situation underscores the degree to which Trump Media is reliant on Trump himself and his choice of social media platform. Truth Social has struggled to gain a substantial user base beyond Trump’s loyal followers.
By reappearing on X, Trump has inadvertently introduced competition to his own platform, casting doubt on Truth Social’s ability to grow independently. Analysts note that X’s broad reach makes it more appealing for political campaigning, allowing Trump to reconnect with a vast audience that Truth Social’s limited user base cannot match.
As the election draws near, Trump’s shifting social media strategy may continue to impact TMTG stock, presenting challenges to the platform’s long-term viability. Analysts believe that without substantial revenue growth, user engagement, or a diversified influencer base, Truth Social’s reliance on Trump exposes it to significant risk.
While the former president’s return to X enhances his campaign visibility, it raises doubts about Truth Social’s future, leaving investors to question whether the platform can sustain interest without his undivided attention.