FILE PHOTO: The Truth social network logo is seen displayed behind a woman holding a smartphone in this picture illustration taken February 21, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
Shares of Donald Trump’s Trump Media & Technology Group surged as much as 59 percent on Tuesday in their Nasdaq debut, lifted by the former U.S. president’s supporters and providing him a potential windfall as he grapples with the costs of several legal cases.
At its session high of $79.38 per share, TMTG’s market capitalization crossed $10 billion on an undiluted basis, an astronomical valuation for a company that reported an operating loss of $10.6 million for the first nine months of 2023 on revenue of just $3.4 million.
The stock closed 16 percent higher at $57.99, valuing the company at nearly $8 billion.
Trump’s majority stake in TMTG was last valued at about $6 billion, although lock-up restrictions for six months could prevent him from selling or borrowing against his shareholding.
READ: Trump’s social media firm goes public, may net billions
TMTG’s stock market debut follows its merger with blank-check company Digital World Acquisition Corp that was announced in 2021 but suffered setbacks and delays.
Trump’s financial woes
Digital World and the newly listed TMTG have together surged almost 600 percent since the deal was announced, cementing TMTG’s status as one of Wall Street’s so-called meme stocks popular among retail traders and whose movement can be driven by posts on social media.
“The valuation of the business is rich relative to its underlying fundamentals, but I would not get in front of it in the near term,” said Thomas Hayes, chairman of Great Hill Capital.
“This valuation may be more of a proxy on the enthusiasm of supporters for Trump than a reasonable estimate of underlying business prospects.”
Trading in the shares under the new ticker “DJT” was briefly halted just after the opening bell due to volatility.
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Retail trader-focused social media and trading platform Stocktwits listed it as the most trending stock.
Shares of Digital World Acquisition Corp, which is now TMTG, had surged more than 35 percent on Monday after completing its merger.
Trump, who is facing four criminal trials in his race to U.S. presidency, has been struggling to raise money for his campaign and legal expenses.
The company also provides a way for supporters of Trump to bet on his resurgence as a political figure, as evidenced by shares of shell company Digital World Acquisition nearly tripling in value this year.
TMTG’s rise on Tuesday led to losses for investors betting against the stock. Short sellers had racked up $158 million in paper losses this year on their positions in Digital World Acquisition and TMTG, according to analytics firm S3 Partners.
“Today’s price action and valuation are completely out of kilter with the underlying business and its prospects,” said AJ Bell investment analyst Dan Coatsworth.
Divestment plan
The deal will also inject $300 million in cash into TMTG-owned social media platform Truth Social.
Truth Social, launched in February 2022, sought to capitalize on the ban on Trump’s accounts across social media platforms such as Twitter, now X, and those run by Meta Platforms. It also played to users who believe other social media platforms have restricted conservative voices.
In February, Truth Social had 8.9 million sign-ups, according to a regulatory filing. X had 238 million daily active users as of June 2022, as per the latest available official data, while Facebook and Reddit had 2.1 billion and 73 million.
At the height of Tuesday’s rally, Truth Social was valued at over $1,000 per signed-up user, compared with $147 per active user for Reddit, $80 for X and $46 for Snapchat.
Digital World said in a filing last month that Trump may divest his stake in Truth Social and cease any involvement in its management based on how his bid for president goes.
The blank-check firm signed its merger agreement with Trump’s company in October 2021 and since then, has been the target of investigations by the U.S. Department of Justice.