Trump Media's stock is almost certain to crash

Donald Trump's newly public social-media company is not the next Nvidia — or Meta or Google or whatever has happened with X/Twitter.

The share price of Trump Media and Technology Group, trading under the stock ticker DJT (because of course it is), surged following the completion of its SPAC merger last week. A SPAC, or a special-purpose acquisition company, is a shell company — in this case, Digital World Acquisition — that goes public with the intention of buying an actual company later. For a while, TMTG's market cap was in the $9 billion range, making it more valuable than Etsy and Hasbro. That bumped up the former president's net worth to $7 billion, though not in a way he can immediately take advantage of. Unless the company's board says otherwise, Trump can't sell his shares for six months.

If I were Trump, though, I would cajole the board to speed up that lockup period so I could cash in. It seems, let's say, unlikely that his media company's stock price is going to stay so high forever.

For one thing, TMTG, which owns the conservative Twitter copycat Truth Social, makes basically nothing. Its total revenue was $3.4 million in the first nine months of 2023. Extrapolate that out, and the stock is probably trading at something like 2,000 times the company's annual revenue. That is, um, high. Apple, for example, trades at about seven times its total revenue. And given TMTG's paltry revenue, it actually lost $49 million in the same period.

Trump's company says it has bigger plans ahead, such as growing Truth Social and developing "one or more additional cutting-edge products and/or services" to complement Truth, including some sort of video-streaming situation that "provides a 'home' for cancelled content creators." What exactly this might look like, or how many people would flock to it, isn't clear.

Truth Social had an estimated 5 million monthly website visits in February of this year, according to third-party trackers, but the company isn't revealing exact metrics right now. By comparison, Facebook had 845 million monthly active users when it went public in 2012, and Twitter had 215 million when it IPO'd the following year. The long and the short of it is that TMTG is not a thriving business.

But maybe other social-media outlets, which are designed to appeal to the widest possible base, aren't the right comparison. Truth Social and any other business Trump Media and Technology Group spins up is pretty much guaranteed to appeal just to Trump fans.

Trump's media company isn't the first conservative outfit to go public via SPAC in recent years and try to make money off of right-leaning consumers and investors. Its predecessors have not done so hot. Rumble, a Peter Thiel-backed YouTube for the right, rose by some 40% on its first day of trading in September 2022 and has been hanging well below that ever since. Both Black Rifle Coffee, a Starbucks for Republicans, and Public Square, the GOP's supposed alternative to Amazon, have followed similar trajectories: a stock pop early on, then sitting under $10 ever since. None of them have achieved sustained profitability, though Black Rifle says it's on the path to it.

Being in the business of anti-woke is not especially lucrative. As much as people say they want to shop and invest their values, it often doesn't turn out to be the case. Instead, most people opt for the convenient option and whatever they're most used to doing already. There's a reason most boycotts don't work — people are busy and tired. It's true on the left as well. Dig deep enough, and every company in the world can probably give you a reason not to want to give them your money.

Might Trump and Truth Social be different, at least on the stock front? I mean, I suppose anything is possible. As my colleague Peter Kafka points out, investors aren't shorting the stock en masse yet, in part because doing so is hard and in part because you can see DJT taking off with the meme-stock crowd. GameStop and AMC weren't doing particularly awesome from a business sense when they achieved meme status, yet small-time investors were eager to pile into them. For a good chunk of the country, tossing some cash into Trump's company is not only a way to stick it to The Man but also to The Woke Man. Trump has also spent years insisting that his literal name is worth a ton of money, and I guess we're about to find out just how much.

Still, I'd guess Trump has much better odds of winning the White House (or ending up with some criminal convictions) than he does seeing his mediocre social-media company take off. He might want to call up someone on TMTG's board — say, his son Don Jr. — and see about them getting a meeting on the books to let him start offloading shares sooner rather than later.

Emily Stewart is a senior correspondent at Business Insider, writing about business and the economy.