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After a high Trump Media's share plummet, experts warn of risks linked to Trump
Shares of Trump Media & Technology Group (TMTG) have been falling since the blockbuster debut.
Trump Media's share price plummeted Monday morning after the social media app company, closely associated with former President Donald Trump, reported a net loss of $58.2 million on revenue of $4.1 million in 2023.
Shares of Trump Media & Technology Group (TMTG) dropped by more than 15.7% as of 11:38 a.m. ET. Despite the decline, the company's market capitalization remained over $7 billion following its 8-K filing with the Securities and Exchange Commission revealing last year's loss.
Why are Trump Media's share prices falling?
The filing indicated that a significant portion of the net loss, $39.4 million, was due to interest expenses. In contrast, in 2022, Trump Media had reported a net profit of $50.5 million on total revenue of $1.47 million. The company ended 2023 with just $2.7 million in cash on hand.
The losses sustained by Trump Media, the owner of the Truth Social app frequently used by the former president, could persist for the foreseeable future, according to the company.
“TMTG expects to incur operating losses for the foreseeable future,” the filing stated, which came a week after the company began trading under the ticker DJT on the Nasdaq.
Trump’s involvement in the company could expose it to greater risks
The filing also cautioned shareholders that Trump’s involvement in the company could expose it to greater risks than other social media companies. Additionally, TMTG disclosed to regulators that it had identified "material weaknesses in its internal control over financial reporting" during the preparation of a previous financial statement for the first three quarters of 2023. As of Monday, Trump Media stated that these “identified material weaknesses continue to exist.”
Donald Trump owns 57.3% of Trump Media shares, valued at more than $4 billion, which Forbes recently stated would represent well over half of his total net worth. He also stands to receive an additional 36 million "earn-out" shares over the next three years, provided Trump Media’s stock meets certain price benchmarks during that period. These targets are all below the company’s stock price early Monday.
Trump Media’s share price surged when it began trading last Tuesday, following the firm's merger with a special purpose acquisition company, Digital World Acquisition Corp., previously traded under the ticker DWAC. The newly merged company now trades under Trump’s initials, DJT.
Also Read: Truth Social's blockbuster debut
Analysts point out that the company’s high valuation is partly due to stock purchases by Trump’s political supporters, who are eager to own part of a company closely associated with the presumptive Republican presidential nominee. However, this enthusiasm poses unique risks for the company. The new 8-K filing stated that Trump Media “may be subject to greater risks than typical social media platforms because of the focus of its offerings and the involvement of President Trump.”
“These risks include active discouragement of users, harassment of advertisers or content providers, increased risk of hacking of TMTG’s platform, lesser need for Truth Social if First Amendment speech is not suppressed, criticism of Truth Social for its moderation practices, and increased stockholder suits.”
