Republican presidential nominee and former Apprentice star Donald J. Trump will soon have the chance to secure a $2.5 billion windfall from selling his stake in Truth Social, the social media platform he launched in 2022.
Although Trump has made no suggestion that these are his intentions, with spiralling legal costs and an expensive presidential campaign on the go, there is a clear impetus for him to do so.
The stock in question, specifically Trump Media & Technology Group (TMTG), essentially trades like a meme stock.
The company has a market value of $4.33 billion as of today (it was valued at double that a month ago), yet this valuation is hardly tied to anything tangible.
It earned less than a million dollars in the three months ending 30 June, or around $1.6 million over six months. Losses from operations in the six-month period were $344 million.
Truth Social is sheepish with its key performance indicators. In fact, it has apparently stopped collecting subscription data altogether.
From launch to mid-February 2024, Truth Social said it added nine million users.
But its latest quarterly report states: “Investors should be aware that since its inception, TMTG has not relied on any specific key performance metric to make business or operating decisions.
“Consequently, it has not been maintaining internal controls and procedures for periodically collecting such information, if any.”
It continued: “While many mature industry peers may gather and analyze certain metrics, given the early development stage of the Truth Social platform, TMTG’s management team believes that such metrics are not critical in the near future for the business and operation of the platform.
“This stance is due to TMTG’s long-term commitment to implementing a robust business plan, which may involve introducing innovative features and potentially incorporating new technologies, such as advanced video streaming services on its platform.
“At this juncture in its development, TMTG believes that adhering to traditional key performance indicators, such as signups, average revenue per user, ad impressions and pricing, or active user accounts including monthly and daily active users, could potentially divert its focus from strategic evaluation with respect to the progress and growth of its business.”
While certain shareholders may believe in Truth Social’s business prospects, the stock undoubtedly holds a place among the pantheon of meme stocks, or s**tcoins in the cryptocurrency space, that trade more on ‘vibes’ than any fundamental underlying worth.
The MAGA hat of the stockmarket
Holding a bag of TMTG shares signals being part of a community, like the stock equivalent of wearing a MAGA hat.
As evidence of TMTG’s meme stock qualities, the stock spiked 33% on 12 July, not in response to any business fundamentals but in response to the assassination attempt on Trump’s life.
But the stock has been in freefall ever since, culminating in an all-time low of $21.41 on Tuesday.
By Truth Social’s own acknowledgement, the success of the stock “depends in part on the popularity of our brand and the reputation and popularity of President Donald J. Trump”.
Adding: “The value of TMTG’s brand may diminish if the popularity of President Donald J. Trump were to suffer.
“Adverse reactions to publicity relating to President Donald J. Trump, or the loss of his services, could adversely affect TMTG’s revenues, results of operations and its ability to maintain or generate a consumer base”.
Truth Social acknowledges that “President Donald J. Trump is involved in numerous lawsuits and other matters that could damage his reputation”.
Furthermore, “TMTG’s business plan relies on President Donald J. Trump bringing his former social media followers to TMTG’s platform”.
In contrast to this statement, Trump has recently returned as an active user of competing social media platform Twitter/X.
He has made no less than 13 X posts over the past four days, as well as engaging in a two-hour interview with X owner Elon Musk on the platform earlier this month.
There’s one other problem for Truth Social as a social media platform.
“Truth Social is a social media platform aiming to disrupt big tech’s control on free speech by opening up the internet and giving the American people their voices back,” goes its mission statement.
Given this is precisely the narrative surrounding Elon Musk’s vision of Twitter/X, has Truth Social been rendered irrelevant?
Payday approaches
TMTG’s declining valuation and tentative relevance aside, Trump still stands to make a killing should he decide to sell his shares.
As a 58.7% shareholder, his stake has a paper value of around $2.5 billion. Under general lock-up agreements, Trump can sell his stake six months after the 25 March, when the company officially started publicly trading.
He has not disclosed any intention to do that, but his intentions will become clearer in a few short weeks when the lock-up period ends.
The company’s value will inevitably collapse if Trump does decide to cash out, but will the swatches of meme stockholders care?
Probably not, if their intentions were to support the Trump campaign by proxy.