Trump Media stock (DJT) just completed a 100% reversal back to where it started in January 2024. Do not expect a rebound of excitement and expectations. Instead, watch for deterioration as the company's low fundamentals play a larger role in the stock price setting.
Here is the picture of 2024, with the $17.50 starting point level shown relative to the stock's higher-priced gyrations from mid-January to last week.
Back to start
If it plows through $17.50, the major barrier of $15 is likely the next stop. That would be a sign that DJT has truly broken away from 2024 and is on a new path that will be especially susceptible to the risks below. Here is the updated graph with the lower barriers. (Below $5 is a guessing game.)
It is a great unknown as to what happens when that unlocking occurs. Besides Donald Trump's large position, there are a wide variety of shareholders who received their shares as payment for services rendered or as repayment of loans provided.
The Donald Trump brand has helped support the stock price well above its fundamental evaluation. Therefore, if Trump loses the election, that brand weight could decrease in importance.
The previous two reports had very low revenues. Also, growth was negative, and earnings were negative. If the same picture emerges, the fundamental evaluations will continue to be low.
If he does, regardless of the reason given, it will likely be seen as a cashing out and a partial desertion from Trump Media.
With the fundamentals so low, the stock will likely have trouble gaining any ground, particularly with the added negatives above. So, holding cash and sitting on the sidelines still looks like a good strategy.
The DJT Slump: A Meme Stock or a Sign of Trump's Fading Influence?
The DJT slump, which followed a brief surge in mid-July spurred by the former president surviving an assassination attempt, has shaved billions of dollars off the company's market capitalization.
Trump Media ended the trading day at $16.98 per share, a 6% decline on the day.
The stock has fallen more than 75% from its intraday peak of $79.38 per share, which it hit in its Nasdaq trading debut in late March following Trump Media's merger with a special purpose acquisition company.
The stock price has ricocheted since then, as traders and analysts increasingly viewed Trump Media as a meme stock and as its value rose and fell with the political fortunes of the Republican presidential nominee.
Shares of the SPAC, Digital World Acquisition Corp., were at $17.50 at the market close on Dec. 29, the last trading session of 2023.
They shot up in mid-January, around the time that Trump emerged as the clear front-runner in the Republican presidential primary.
A Closer Look at Trump Media's Finances
A Trump Media spokesperson told CNBC in a statement, "Trump Media is rapidly building out our platform while maintaining a strong balance sheet."
"So far in 2024, we achieved a key milestone with the launch of our in-app streaming platform on our uncancellable, custom-built content delivery network while maintaining a strong Q2 financial position with $344 million in cash and cash equivalents and zero debt," the spokesperson said.
Despite losing millions of dollars in consecutive fiscal quarters and generating scant revenue from Truth Social ad sales, Trump Media's market capitalization is currently around $3.5 billion. At its post-merger peak in late March, it was valued at nearly $8 billion.
Trump owns nearly 59% of the company's outstanding shares, which at Wednesday's price were worth just under $2 billion — about half of his total on-paper net worth, according to Forbes.
Trump and other company insiders cannot sell their shares until a lock-up agreement expires, which could be as soon as Sept. 19.
That upcoming deadline has stoked speculation about whether Trump will try to cash out his shares or hold on to his stake.
The Implications of a Trump Share Sale
If he does move to sell, he could rattle other investors' confidence in the stock and push the price even lower.
Even if he doesn't, other early investors could. Trump Media in August asked a Florida judge to temporarily block two firms involved in the SPAC merger from selling more than 18 million shares once their lockup expires.
The company's request, which described that sale as "imminent," was denied.
As the lockup deadline approaches, Trump has increasingly posted on other social media platforms, including TikTok and Elon Musk's X.
Trump nevertheless talked up Truth Social in a recent interview with podcaster Lex Fridman.
"Truth is very powerful," Trump said. "And it's my platform and it's been very powerful, very, very powerful."
"Truth has become a very successful platform. And I like doing it, and it goes everywhere. As soon as I do it, it goes everywhere," he added.
The Future of Trump Media
The recent slump in Trump Media's stock price raises important questions about the company's future and the strength of Donald Trump's influence. While Trump has repeatedly touted Truth Social as a successful platform, the company's financial performance and stock price suggest a different reality.
With the lock-up period ending soon, the coming weeks will be crucial for Trump Media. Whether Trump decides to sell his stake or not, the company's fate remains uncertain. The stock's performance will likely be influenced by a combination of factors, including the upcoming election, Trump's political influence, and the company's own financial performance. Only time will tell if Trump Media can regain its lost momentum or if its stock will continue to tumble.
