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Trump Media & Technology Group: A Controversial $8 Billion Valuation Amidst Financial Struggles

Despite significant financial losses, minimal revenue generation, and Truth Social’s status as a minor player in the social media landscape, Wall Street has assigned a staggering valuation of nearly $8 billion to Trump Media & Technology Group. This figure has tripled in just five weeks.

Following a sharp decline to record lows on September 23, Trump Media’s stock price has surged dramatically. Market analysts attribute this remarkable rebound primarily to speculation surrounding former President Donald Trump’s potential return to the White House.

Trump Media operates outside the typical norms of stock trading. It resembles a “meme stock,” driven not by financial fundamentals but by hype and the momentum linked to the Republican nominee’s political prospects. Essentially, the stock acts as a barometer of trader sentiment regarding the upcoming election.

Gene Munster, managing partner and co-founder of Deepwater Asset Management, stated, “I’ve never seen anything quite like this. This company’s value is almost entirely based on the outcome of an election.”

A Questionable Valuation

Munster emphasized that there is “nothing” in Trump Media’s fundamentals to justify its nearly $8 billion market value. The company reported a mere $837,000 in revenue for the second quarter—an amount more typical of a business valued in the millions, not billions.

Nevertheless, since September 23, the company’s share price has soared more than 200%. Munster explained, “If Trump wins the election, it’s going to be worth more than the $8 billion it’s currently worth. If he loses, it will be worth significantly less.”

As the dominant shareholder, Trump’s stake of 114.75 million shares is now valued at approximately $4.5 billion, a substantial increase from $1.4 billion on September 23. His commitment to not sell his shares, along with the absence of any disclosed stock sales, has further bolstered the stock price.

The Dynamics of a Meme Stock

George Kailas, CEO of Prospero.ai, likened Trump Media’s trading pattern to that of a classic meme stock. He noted that social sentiment has driven the stock’s price to an extraordinary 1,600 times its enterprise value—an assessment he deemed “crazy,” especially compared to other high-flying stocks.

“There’s not a good story about how they are going to justify that valuation,” Kailas added, as the race for the White House remains extremely close. In July, Trump Media’s stock price plummeted after President Joe Biden announced his reelection bid, with polls suggesting a challenging road ahead for Trump against Democratic nominee Kamala Harris. However, recent polls indicate that Trump and Harris are now neck-and-neck.

Steve Sosnick, chief strategist at Interactive Brokers, noted, “If Trump wins the election, the company’s prospects increase dramatically.” He suggested that Truth Social could become a key platform for presidential communications if Trump returns to power.

Potential Volatility Ahead

Trump Media’s already volatile stock price is likely to experience further fluctuations leading up to the election. Munster predicted that the stock could continue to rise into the election, potentially retreating afterward in a classic “buy-on-the-rumor, sell-on-the-news” scenario. Conversely, a Trump loss could trigger a sharp selloff.

“If he loses, I suspect it’s a billion-dollar company,” Munster asserted. Sosnick echoed this sentiment, noting that without Trump’s electoral victory, the company would revert to being “a few years old, with modest revenue and essentially no profits.” He concluded, “If this were called Joe’s Media Company, we wouldn’t even be talking about it, and it wouldn’t have a value anywhere close to this. The value is completely tied to the former president.”

Source: CNN

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