NEW YORK: Shares of Donald Trump鈥檚 social media company rose about 16 percent in the first day of trading on the Nasdaq, boosting the value of Trump鈥檚 large stake in the company as well as the smaller holdings of fans who purchased shares as a show of support for the former president.
Trump Media & Technology Group Corp. merged Monday with a blank-check company called Digital World Acquisition Corp. Trump Media, which runs the social media platform Truth Social, has now taken Digital World鈥檚 place on the Nasdaq stock exchange.
Shares closed at $57.99, up 16.1 percent, giving the company a market value of $7.85 billion. At one point the stock was up about 59 percent. Trump holds a nearly 60 percent ownership stake in the company, now worth about $4.6 billion.
Many of those investing in Trump Media are small-time investors either trying to support Trump or aiming to cash in on the mania, instead of big institutional and professional investors. Those shareholders helped the stock of Digital World more than double this year in anticipation of the merger going through.
Truth Social launched in February 2022, one year after Trump was banned from major social platforms including Facebook and X, formerly Twitter, following the Jan. 6 insurrection at the US Capitol. He鈥檚 since been reinstated to both but has stuck with Truth Social.
On Truth Social Tuesday, users were posting about being shareholders or seeking tips on how to buy shares.
One user urged conservatives to 鈥済et behind the DJT stock and sent it over $100 per share鈥� to 鈥渄rive the liberals insane!鈥� Another declared: 鈥淕et yourself a piece of #DJT stock if your a true MAGA supporter.鈥�
A day earlier, Trump Media CEO Devin Nunes, a former House Republican, said, 鈥淎s a public company, we will passionately pursue our vision to build a movement to reclaim the Internet from Big Tech censors.鈥�
Despite the enthusiasm, investors could experience a bumpy ride. For one, they鈥檙e betting on a company with uncertain prospects of turning a profit. Trump Media lost $49 million in the first nine months of last year, when it brought in just $3.4 million in revenue and had to pay $37.7 million in interest expenses.
In a recent regulatory filing, the company cited the high rate of failure for new social media platforms, as well as its expectation that its operations will lose 鈥渇or the foreseeable future鈥� as risks for investors.
Research firm Similarweb estimates that Truth Social had roughly 5 million active mobile and web users in February. That鈥檚 far below TikTok鈥檚 more than 2 billion and Facebook鈥檚 3 billion 鈥� but still higher than other 鈥渁lt-tech鈥� rivals like Parler.
However, Trump Media has said it doesn鈥檛 keep track of some numbers that rivals use as key measures of their performance, such as average revenue per user or active user accounts. It says it wants to focus on the long-term instead of 鈥渟hort-term decision-making.鈥�
For that long term, though, skeptics see struggles ahead for a company that鈥檚 estimated to have far fewer users than rivals in a business where gaining a critical mass is key.
鈥淚 think there is a possibility of, sooner or later, the stock price falling by 95 percent,鈥� said Jay Ritter, a professor and expert on initial public offerings of stock at the University of Florida鈥檚 Warrington College of Business.
Brian Dunn, director of the Institute for Compensation Studies at Cornell University, compared the fervor for Trump Media shares to the meme stock craze that boosted shares of companies such as GameStop and AMC Entertainment to exorbitant heights in 2021.
鈥淟ike any meme stock or fad, as long as there鈥檚 a greater fool to buy you out for what you paid for it, than you can continue to prosper,鈥� Dunn said, warning that small investors 鈥渃ould end up holding the bag when the music stops.鈥�
On Monday, Trump told reporters that 鈥淭ruth Social is doing very well. It鈥檚 hot as a pistol and doing great.鈥� On Tuesday, he posted 鈥淚 LOVE TRUTH SOCIAL, I LOVE THE TRUTH!,鈥� on the platform.
The company, which is based in Florida, said in a recent regulatory filing that it 鈥渋s highly dependent on the popularity and presence of President Trump.鈥� Trump Media has acknowledged that there are risks associated with Trump鈥檚 outsized influence.
If the former president were to limit or discontinue his relationship with the company for any reason, including due to his campaign to regain the presidency, the company 鈥渨ould be significantly disadvantaged,鈥� it said in a filing ahead of the merger with Digital World.
Acknowledging Trump鈥檚 involvement in numerous legal proceedings, the company noted that 鈥渁n adverse outcome in one or more鈥� of the cases could negatively affect Trump Media and Truth Social.
Another risk, the company said, was that as a controlling stockholder, Trump would be entitled to vote his shares in his own interest, which may not always be in the interests of all the shareholders generally.