Trump's Truth Social Stock Soars Despite Losses: Why?

Amid speculation, Truth Social sees unprecedented stock market success.

by Nouman Rasool
Trump's Truth Social Stock Soars Despite Losses: Why?
© Michael M. Santiago/Getty Images

In a remarkable surge of market activity, shares of Truth Social, the social media venture spearheaded by former President Donald Trump, witnessed a significant climb in its initial days of public trading. Trump Media & Technology Group, the platform's parent entity, experienced a 16% rise in its stock value upon debuting on Tuesday.

The momentum continued into Wednesday, with an additional 14% increase observed by the afternoon. This rally propelled Truth Social's valuation to an astonishing $8 billion, a figure that stands in stark contrast to the company's modest quarterly earnings of just around $1 million and its ongoing struggle to achieve profitability.

This bullish trend in the stock market not only augurs well for Truth Social but also spells a potentially lucrative outcome for Trump, who holds a 60% stake in the company, positioning him for a multi-billion dollar gain.

Market analysts, in discussions with ABC News, suggest that the stock's performance is less about the company's financial health and more a reflection of political sentiment and speculative trading. Tom Essaye, president of Sevens Report Research, commented, "This is people voicing their political opinions through the markets," emphasizing the disconnection from financial fundamentals.

Trump Hails Success

Truth Social's representative was unreachable for comment, but Trump, in a statement to the press in New York, remarked on the platform's success, describing it as "hot as a pistol and doing great." This phenomenon mirrors the rise of "meme stocks" like GameStop and AMC, which saw their values skyrocket based on social media-driven speculation rather than corporate achievements.

However, despite its burgeoning stock value, Truth Social lags significantly behind giants of the social media world in terms of user engagement. Estimates from research firm SimilarWeb placed its website visitor count at 5 million in February, dwarfed by Instagram's 2 billion and TikTok's 1 billion monthly active users.

The financial figures further underscore the challenges faced by Truth Social, with the platform reporting $3 million in revenue against $49 million in net losses over the first nine months of 2023, in sharp contrast to the revenue generated by platforms like Instagram.

The spike in Truth Social's stock price comes amid Trump's ongoing financial tribulations, including a recent appellate court ruling requiring him to post a $175 million bond. Despite these challenges, the surge in stock value has notably increased Trump's net worth, with Bloomberg listing him on their Billionaires Index with an estimated fortune of $6.5 billion, which subsequently rose to over $7 billion.

While skeptics like Essaye predict a correction in Truth Social's stock price aligned with financial realities, the platform could still carve a niche for itself within the competitive landscape of social media, particularly as a conduit for Trump's broader media ambitions.

"If you think about DJT as a way to buy equity in Donald Trump’s brand, then I would never say it can’t work out," Essaye posited, acknowledging Trump's knack for brand promotion.