Shares in Donald Trump’s Truth Social dropped by as much as 25% on Monday after the social media company revealed it lost $58.2m last year and an auditor disclosed “substantial doubt” over its ability to continue operating.
An extraordinary stock market debut last week left Trump Media & Technology Group valued at more than $7bn. But it generated sales of just $4.13m in 2023, according to regulatory filings.
While over $4m in sales marks significant growth from $1.47m in 2022, the previous year, it underlines the small scale of Trump Media’s operation – and the depth of its losses.
BF Borgers of Colorado, an auditor for the company, said the losses “raise substantial doubt about its ability to continue as a going concern”, according to Monday’s filings.
Shares in the group – and Digital World Acquisition, the shell company with which it merged to go public – have been surging since the turn of the year.
The company has a similar valuation to Reddit, a social network that also went public last month. Reddit generated sales of $804m in 2023, according to regulatory filings, and losses of $90.8m.
Net losses at Trump Media came to $58.2m in 2023. Stripping out interest expenses on its debt, the firm posted operating losses of $16m, down slightly from $23.2m in 2022.
A volatile market surge over recent months has nevertheless transformed Trump Media into a so-called meme stock, boosted by internet memes – posted, in its case, on platforms including Truth Social – urging retail investors to buy into it.
It has joined a small bevy of stocks, most famously the video games retailer GameStop, which rattled Wall Street by staging unexpected, turbulent rallies in recent years. Maintaining momentum after the initial surge has often proved challenging.
Trump has a vast stake in Trump Media, and its arrival on the market has netted him a multibillion-dollar paper fortune. When it finally combined with Digital World last Monday, Bloomberg said the former president had joined the ranks of the world’s 500 wealthiest people for the first time.
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He is currently unable to offload his stake, however, and will need the stock to continue to trade at the levels to which it has surged in recent months if he is to raise billions of dollars from a sale.
Trump, who is vying to regain the presidency from Joe Biden in November’s election, is grappling with hefty legal costs. He is on the hook for $454m after a civil fraud case, although the former president was recently thrown a lifeline when a panel of appellate court judges provided him with 10 days to secure a far smaller $175m bond.
John Rekenthaler, vice-president for research at Morningstar, recently argued Trump Media was akin to a cryptocurrency. “As with bitcoin, people buy Trump Media not for future cash flows but because: 1) they expect its price to rise, and 2) they feel an affiliation for the asset,” he wrote. “Bitcoin owners are members of a club.
“So, too, are Trump Media investors, to an even greater degree. For them, DJT shares represent a currency by which they can express their beliefs and commitment.”
