Just two weeks ago, Trump’s social media company made its debut on Wall Street with good numbers.
However, on Monday, Trump Media’s share price closed at $37.17, an 8.43% drop, leaving its market capitalization hovering just above $5.55 billion.
Earlier on Friday, the stock faced a bleak start to the trading week on the Nasdaq stock exchange following a 12% decline in its share price.
The current share prices are a far cry from the record high of $79 it had notched during its debut on March 26. It is down about 40% so far in April.
Truth Social is the social media platform owned by Trump Media & Technology Group (TMTG), which signed a then-thought-to-be-successful merger. Former President Donald Trump is the biggest shareholder, personally owning 78.75 million shares of its stock. Owing to the loss, the value of Trump’s 58% stake in Trump Media has accordingly cratered in the 13-day stretch, falling from $6.25 billion to $2.93 billion.
Since the shares have been hammered, Trump’s net worth from its March peak of more than $6 billion has fallen to $4.8 billion.
It is widely said that the stock has not behaved like a typical one from day one. CNN reported that during Trump Media’s first nine trading days with the ticker symbol “DJT,” the stock has moved up or down by at least 5% each day. More than half the days, it has moved by double-digit percentages.
Why the turbulence in the stock?
Firstly, Trump Media is a new stock with no trading history, plus it isn’t an entirely established company, which tends to experience a bumpy ride initially.
Secondly, to value stocks, their price-to-sales ratio shall be measured. In the present case, the company had a lucrative valuation at as much as $11 billion the day it started trading despite the fact that Trump Media lost $58 million in 2023 and generated very little revenue: just $4.1 million that year.
Thirdly, the shareholder base likely consists of a significant number of momentum traders, which likely amplify moves or vice versa.
Next, since Trump holds a substantial portion of the shares, they can’t be sold anytime soon as they are stuck on the sidelines due to lock-up restrictions. Also, with the tiny free float of stocks with just 40 billion the actual number of shares changing hands is likely even smaller, making the stock subject to high levels of volatility.
Finally, the chief reason behind the tug-of-war in the marketplace is the Trump factor. The people are merely betting on the political destiny of the former President based on their feelings towards him.
Those betting against the stock made about $16 million in market-to-market profits, though those shorting the stock are still down 69% for the year.
