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Trump Media & Technology Group Corp--Ticker: DJT--keeps going up despite predictions from as far as a year ago about how it it's running out of money. The rapid stock price appreciation over the past 3 months, from as low at $13 to $33, has has caught many short-sellers by surprise, and shows no sign of slowing.
There are a few ways of looking at this:
DJT stock is mostly a proxy for Trump's odds. People are buying DJT stock as a bet on Trump winning. DJT stock has superior liquidity, more possible upside, and less counterparty risk compared to prediction markets. The actual business is less relevant , although Trump Media should get a tailwind from Trump winning in terms of increased traffic and ad revenue to Truth Social and other Trump properties. Cryptocurrency, however, which should also stand to benefit from a Trump win, has seen much weaker price action compared to DJT this week. DJT was up 10% whereas bitcoin was down, suggesting DJT's price action is not entirety a stand-in for his odds, or that other factors are at play, like short covering.
In a blog post, I entertain a completely overlooked possibility: Trump media benefits from free advertising from the Trump brand itself more so than than if he wins or not. Even after losing in 2020, Trump was in the news constantly, or his sons or other family were. Advertising is one of the biggest expenses of any business. Trump gets, by my estimate, hundreds of millions of dollars of free marketing just by existing. This has to be worth something in the context of valuation.
Trump Media can launch a product or enter into a partnership, and the most expensive part--advertising for the userbase acquisition--is instantly covered at no cost. Trump's fans (or Republicans ,in general, or the overlap between Elon's fans and Trump's base) are the users, and the media's coverage (plus Twitter; Trump has the second-most popular account second to the CEO himself) is the marketing. All of it is free. Truth Social has not big a huge success, admittedly, but the market is likely pricing in additional pivots and partnership that should be bigger.
I predict there will be something involving Elon that leverages X/Twitter userbase or something like that. Trump also has his own personal conglomerate, The Trump Organization, which according to Wiki has $600 million in annual earnings. It's possible The Trump Organization can merge or go public under DJT, effectively combining the two under the same ticker. Although, being public, this would bring scrutiny to his business dealings that Trump may want to avoid.
In the context of efficient markets, if DJT were really on a collision course with insolvency as the media claims or as expected, it would be priced more appropriately, closer to zero instead of $33, so there is probably something up. It reminds me of twitter. The company has been stagnant and losing money forever, yet held on from 2013-2022 until being acquired at the upper-end of its price range despite endless losses.
I think DJT has become a meme stock the same way GME and BBY were before it. Nobody buying DJT at $30 a share is doing a rational valuation based on its actual business. We are talking about a company that, in the three months ending June 30th, had revenue of $800k against operating costs of $19M. You can go read the latest 10Q yourself. Their own calculation shows an outstanding share count of 191M shares against $341M of equity. That's an implied share price below $2, assuming DJT was breaking even in its operations. So, what's the path for DJT to 20x its revenue without any increase in operating cost?
Part of what may be inflating the stock price is the fact it's so expensive and risky to bet against it. shorting is close to impossible due to restrictions and borrow costs; put options absurdly expensive.
i believe Truth Social is profitable as a business and that these $19 million losses are due to one-time expenses, like legal fees . this is under: "Other general and administrative (G&A)"
https://www.usatoday.com/story/money/2024/08/12/trump-media-truth-social-stock-price/74768174007/
most of those losses due to the development of the streaming service and legal expenses, which is not too bad.
According to the USA Today article you linked Truth Social had $8.3M in legal expenses and $3.1M in technology expenses for its streaming service. Assuming both of these go to 0 that still leaves them with ~$8M in losses against 800k in revenue. Do you think Truth Social increased it's revenue 10x in the last three months? Did they reduce a bunch of other costs by 90%?
But it's not like they are going to developing a new streaming platform every quarter, or have to pay the same legal expenses every quarter. The streaming platform is is the second unveiling since Truth Social , which is already 2 years old. The legal expenses are related to Trump Media's merger, which is also not a recurring expense. If this were $19 million in advertising to promote Truth Social, then this would be a much worse situation, as it's understood to be recurring. Similar newly-public tech companies such as Twitter and Uber also had large legal expenses after going public, but these proved temporary even if a big deal at the time.
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One might note that Twitter was bought to the moon on similarly dismal fundamentals year after year -- until the nasssty Musksises dropped a tonne of cash on it of course.
Evidence that Twitter's fundamentals were "similarly dismal?" As of Twitter's last 10Q they were reporting $1.2B in revenue against $1.5B of expenses for a net loss in the $300M range. I think having expenses that are around 25% higher than revenue is pretty different from having expenses that are 1000-2000% (10-20x) higher than revenue, as DJT reports.
I'm thinking more of the early stages -- note that even at the end they were losing quite a lot of money and yet people were still investing for some reason. I'd think that the people investing in TrumpCo also have some analagous reason.
"Losing money" is not, by itself, what I object to. Approximately every company loses money in some quarters. Even billions of dollars. It's the scale of the loss relative to incoming revenue. If you look at Twitter's first 10K after going public you will see there was only one year (2011) in which their losses are more than double their revenue. If you look at their first 10Q after going public you will see they were actually profitable that quarter! Meanwhile DJT is posting losses on the order of 10-20x revenue. As far back as I can find data for Twitter, they were not posting losses like that.
And yet DJT only lost $10-20M -- people were quite happy to buy Twitter when it was burning hundreds of millions.
If (for instance) you think that Truth Social might become 'Right Wing Twitter', getting in early would be a smart move. (not investment advice lol)
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Corruption. There are any number of ways a US president can use their office to make a corporation wealthy and powrrful. And-- it's also potentially a way to launder money into DJT's pocket. Much more efficient than the usual book deal/speaker fee shenanigans.
I predict that most serious presidential candiates, from this point on, will have suspiciously well-performing stock.
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Bitcoin kinda paved the way for stock tickers to act like tokens. After all, Bitcoin's primary use is as a speculative vehicle and as a "store of value". Why not use a stock ticker instead?
In this case, I'd say DJT makes a bad shitcoin because they lose real money and risk being delisted.
But there's an argument that Gamestop (GME) is actually a decent investment as a token. Forget the stores in the mall. They are a lost cause. The main product is the stock itself. When the price of GME goes up, GME issues stock and makes real money. They have like $5 billion of net cash in the bank now. Before the happening, they had a market cap of only $0.25 billion. Long term holders in the company have been rewarded massively.
A tradeable U.S. ticker is an incredibly valuable asset.
As of Gamestop's latest 10Q they reported assets of around $5.5B against 386M outstanding shares. Valuing Gamestop strictly as a pot of money implies a per-share price of around $14/share vs its current closing price of $21/share. Having a tradeable stock ticker is valuable but I am not sure it is worth $3B!
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interestingly, GME used its meme stock surge to sell stock to raise funds for various pivots, of mixed success. the ability to sell inflated stock, plus media coverage, improved GameStop's fundamentals overall https://www.shacknews.com/article/140225/gamestop-gme-75-million-shares-june-2024
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Have we considered that the people betting on Trump winning by buying DJT stock are not exactly well informed financial geniuses? Entirely possible that this is a bubble driven by median voters.
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I haven't followed the DJT stock at all. It's pretty clear Truth social's
constituentsclient base has been basically cannibalized by Elon buying X and making it a more open platform for a fuller range of political appetites. Perhaps Elon will use X to buy Truth, but it seems unlikely. To be fair, they could have many paths towards diversification, (Truth.TV?) (Truth.news?). The question is if they raised the capital requirements to make such a website, hire talent, and prevent hackers from attacking their platform.I agree though, unless there is a clear plan going forward, I highly doubt DJT's long term profitability unless they can post some insane earnings.
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