Trump’s Truth Social share surge explained; How is his firm worth billions now?

The Nasdaq warmly welcomed Donald Trump’s company, Trump Media & Technology Group, on its first day of trading. The stock soared by 50% just minutes after the market opened. The stock market returns came at an opportune time for Republican presidential candidate .
Trump Media’s key asset is Truth Social, a social media platform dubbed as Donald Trump’s alternative to Twitter that he uses for reaching supporters and attacking critics.
Since its inception in early 2022, Truth Social app was downloaded 10 million times, including three million times last year, according to Sensor Tower. By comparison Meta’s Threads had 171 million downloads between its July debut and November.
Thanks to this impressive debut, Trump’s net worth has risen by $4.6 billion. Trump owned social media company is now valued at $8.4 billion and larger than companies like Mattel, Alaska Airlines, and Western Union.
As the majority shareholder, Trump’s company has directors like his son, Donald Trump Jr., and other close allies from his time as president.
Trump will hold 78.75 million shares in Trump Media. This represents up to a 69% stake in the company, depending on how many DWAC shareholders redeem their shares. At a share price of $57.99 (before Wednesday Trade began), this stake was valued at nearly $6 billion on paper, before any dilution.
Many on the street are surprised by the dramatic turnaround of a company that reported less than $3.5 million in revenue over the first three quarters of 2023. Its reported losses exceeded that amount by more than tenfold.
Trump Media’s valuation is disproportionately high compared with other social media companies. The company took in $3.3 million in the first nine months of 2023 and recorded a loss of $49 million, yet its market value — based on Tuesday’s share price — is nearly 2,000 times its estimated annual revenue.
Experts believe, investors often justify high valuations for small companies operating at a loss due to expected growth or the belief that other investors will keep driving up the share prices.
Investor sentiment towards the company’s debut clearly showed high positivity towards Truth Social app platform, hoping it will significantly grow its market share enough for the firm to turn a profit. Many on the street may have opted to invest in Donald Trump’s presidential candidature which should automatically raise his company’s valuations. Stock Market observers believe, it’s less a sign that Wall Street investors are buoyed by Trump’s stock market return than they are bullish on his chances of returning to the White House.
“There are definitely people who like Trump and want to support him. They’re probably buying the stock. And there’s probably other people thinking: If he wins the presidency, who knows?” Kristi Marvin, the finance guru told The Time.
Truth Social’s rally began earlier this year. As Trump secured primary wins during the winter, the Special Purpose Acquisition Company (SPAC) set up to merge with his new social media platform issued millions of additional shares.
In early January, Digital World Acquisition Corporation (DWAC) had 163 shares and closed at $17.32. After Trump won the Iowa caucuses, the company had 8 million shares and closed at $22.35. The following week, after Trump’s victory in New Hampshire, DWAC had 29.5 million shares and closed at $49.69.
There are also clear indications that Yass has won favor with Trump. After their recent meeting, Trump even changed his stance on legislation that could result in a TikTok ban. Yass’s investment firm holds a 15% stake in ByteDance, the Chinese company that owns the popular video-sharing app.