Hidden in plain sight in the first annual report issued by the parent company of Donald Trump’s Truth Social platform was a statement of, well, inescapable truth.
The report, published on April 1 by Trump Media and Technology Group, said: “TMTG’s brand value could decline if President Trump’s popularity were to suffer.” This was cited as a “risk factor” for holding the company’s stock.
So here we are. Since July 21, when President Joe Biden ended his reelection campaign and endorsed Vice President Kamala Harris to run against Trump, stocks have been plummeting.
TMTG may be left without any meaningful solution if President Donald J. Trump downplays his future use of Truth Social.
Trump Media and Technology Group acknowledges the limits of Donald Trump's duty to use his own social media platform
Since then, shares of the company that bears Trump's initials (DJT) as its symbol have lost nearly 39% of their value (the broader stock market, measured by the Standard & Poor's 500 index, has gained nearly 2% over the same period).
Shares have gained daily value just five times during that period and lost ground on 17. Shares closed Tuesday at $21.42, down 82 cents or 3.71%, following a 3.56% drop the day before.
In the context of DJT’s long history as a publicly traded company, that’s not all that remarkable. Measured from its closing price of $57.99 on March 26, when it went public, the stock is down about 63%. Measured from its peak of $79.38, which it hit that day before pulling back, the loss is 73%. Pick which of these calculations you prefer; either one fits the dictionary definition of “ugly.”
DJT may have recovered some or all of its daily decline by the end of trading on Tuesday, and may even be breaking out of the long-term crisis it currently appears to be stuck in. The volatility in the stock has made GameStop look like a sober and stable financial asset.
That said, however, headwinds are mounting, although that was never a secret.
The main obstacle, of course, is the one announced in that annual report: Trump himself. Since Biden's withdrawal upended the presidential race and put Kamala Harris in the spotlight, Trump's prospects for victory in the November election have clearly faded.
At the same time, Trump’s rhetoric and behavior on the campaign trail have become more unhinged and feverish. His standing among MAGA supporters may have remained strong, but his appeal to independent voters appears to have shrunk; it certainly hasn’t improved. Given that DJT is seen as a proxy for his election campaign, his decline in value is not surprising.
But other checks and balances have taken on greater importance. One is the question of what Trump intends to do with his own shares in the company, which amounted to 59.9% of total shares as of mid-July, according to his financial statements. Trump will have the right to sell some or all of those shares beginning in mid-September, when a six-month lockup period expires.
Any hint that Trump is moving to liquidate his exposure to DJT would almost certainly send the stock price lower; anticipation that he is plotting to leave his outside investors in the lurch, as he has done with investors, partners and customers at other companies, may explain some of the weakness in the stock.
Trump owns such a large stake in the company that he could raise $1 billion or more by selling shares before other shareholders have a chance to walk away without suffering a loss.
Trump has already shown that he doesn’t take his responsibility to support Truth Social very seriously. He created the platform as a branded alternative to Twitter (now X) after he was banned from Twitter following the January 6 insurrection. But there is no contractual requirement that Trump use Truth Social as his exclusive social medium.
A provision of his licensing agreement with DJT requires him to post his personal social media communications on Truth Social six hours before posting them on other platforms.
But its agreement with the company allows it to post “politically related” messages on any platform it chooses, and it has the sole right to determine which posts fall into that category. The company says it “lacks any meaningful recourse” if it disagrees with its designation of posts as “politically related.”
Elon Musk reinstated Trump’s X account in November; he had posted there rarely until recently, when his activity increased. And Trump has posted a few tweets on that platform. Most notably, on August 12, he joined Musk for a two-hour ramble. “Interview” full of errors in X, not in Social Truth.
The company is also considered a going concern. It issues all the documents required of a publicly traded company in the United States, but anyone reading them would be wise to open a window first.
Financially speaking, although it still has a market value of $4 billion, the company is unlike any company that the pioneers of value investing could have imagined. Benjamin Graham and David DoddIn its most recent quarterly report, released Aug. 12, it reported a loss of $344 million on revenue of $1.4 billion for the first six months of this year.
No one who has followed Trump's career with any attention could be surprised by those numbers, or by the fact that stocks have performed so well despite them.
Truth Social has been a joke from the beginning: a joke on many of the same people who still wave “Trump Won” flags in their yards or wear red MAGA hats in the company of others. I wrote before the IPOwent public through a special purpose acquisition company, or SPAC, a process often used to skirt government rules on disclosure to investors. SPACs have fallen out of favor because so many of those deals failed; Truth Social had the highest profile of them all, but its fate may not be any different.
In that first annual report released on April Fool’s Day, the company revealed that it barely considered itself a true social media company. It said it had no plans to “collect, monitor or report” the traditional metrics used by other social media platforms, such as “average revenue per user, ad impressions and prices, … monthly and daily active users” — in other words, all the statistics that tell a social media company who is using it, if anyone is using it, and how much their stake is worth in dollars and cents.
Having that information would only “distract” the company’s management, the report said, though it was unclear how management would strategize for the future if it doesn’t know where it is currently, including how many users it has.
I wrote in 2021, when the SPAC deal to take Truth Social public was first announced, which was about to be established A highlight for investment plans And in April, a month after the IPO, Trump might end up laughing all the way to the bank, but his investors would be I had nothing left but tears.
We're on our way to that glorious moment when I'll be able to say, “I told you so.” Or maybe we're already there.
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This story originally appeared in Los Angeles Times.