Billionaire Slams Absurd Valuation of Trump’s Social Media Venture as Share Price Drops

But Trump’s company is supposedly worth millions, not billions, according to LinkedIn billionaire.  

Too High?

Despite a recent drop in share price, former President Trump’s social media company, Truth Social owner Trump Media & Technology Group, is supposedly valued at $6 billion, according to Wall Street.  

Going Up

On Monday, shares of Trump Media climbed over 20%, enjoying its second-best day since trading began on the Nasdaq in late March. The next day, shares jumped another 9%. 

Not a Big Player

But while another social media brand, LinkedIn, was sold to Microsoft for $26 billion in 2016, Trump Media, still a tiny player, generates little revenue. 

Fewer Followers

In addition, Truth Social’s number of users is far fewer than those on Reddit, X (formerly Twitter), and even Instagram’s Threads.

Is It Real?

That’s why LinkedIn co-founder, Reid Hoffman, a vocal critic of Trump, is so confused by Trump’s social media fortune. 

What’s the Truth?

Speaking to CNN, Hoffman claimed “The Truth Social numbers are so absurdly out of the realm of normal business”.

Wrong Ratio?

Hoffman stated that if Meta (one of the strongest American information technology companies) had a price-to-sales ratio like Trump Media’s, that its value would exceed $150 trillion, instead of its current $1.3 trillion market value. 

Millions, Not Billions

“Trump Media is probably more appropriately valued close to $40 million rather than several billion,” Hoffman said. He further added, “Truth Social is burning through hundreds of millions of dollars with nothing to show for it in user engagement, user growth or even potential revenue”.

That’s All?

$4.1 million in revenue: that’s what Trump Media brought in during 2023. Which means Wall Street is assigning a gigantic price-to-sales ratio of over 1,400 based on trailing revenue. 

Forbes’ Figures 

Meanwhile, after using the same metrics used to calculate other social media companies’ values (average revenue per user and price-to-sales ratio), Forbes estimates Trump Media’s value to be between $40 million and $90 million.

Up and Down

And based on Monday’s share price, Trump’s 114.75 million shares in Trump Media are believed to be worth $4 billion. That might be a decrease from $6 billion as recently as May 30th, yet still up from late last week’s $3 billion. 

A Very Important Date

May 30th is the day Trump was convicted of 34 felony counts in a hush money trail, when the social media company lost approximately half its market value.

A Freefall?

Yet last Friday, Trump Media’s share price dropped another 5% to a mere 50% in only three weeks. This is estimated to have erased almost $3 billion of Trump’s estimated net worth. 

Quarter Stats

For its first quarter, Trump Media recorded revenue of a mere $770,500, marking the second-straight quarter of below $1 million revenue. 

A Meme Stock

These figures are what caused some experts to label Trump Media as a meme stock, like GameStop and AMC, that trades on hype and momentum instead of fundamentals. 

Investors’ Rights

In June, Trump Media announced that its registration statement had been approved by the Securities and Exchange Commission. This paves the way for early investors to exercise warrants that they have in Trump Media to purchase more shares. 

Some Welcome Funds

This could help raise approximately $250 million for the brand, which can be used to improve its ad platform or even buy a smaller firm. 

A Two-Edged Sword

But it’s also possible that the exercising of warrants can weaken existing shareholders’ holdings by severely increasing shares that are outstanding in the company. 21.5 million additional shares can be issued by Trump Media.  

This Is Different

Senior IPO Market Strategist at Renaissance Capital, Matthew Kennedy, stated “This is a development-stage company with a multi-billion-dollar valuation”. He added, “When a company’s stock drops significantly, you typically start to see value investors take interest, but that’s not the case with meme stocks”.

But Why So Much?

According to Hoffman, Trump Media’s share price is likely being supported by “gullible money from day traders who support Trump personally”, as well as by a “bet that Trump will win the White House, causing the stock to spike”.  

New Presidential Platform?

This is in line with analysts who previously told CNN that Trump Media is being used to bet on Trump’s political fortunes. It has also been said that Truth Social could become the main platform for presidential communication early next year. 

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The post Billionaire Slams Absurd Valuation of Trump’s Social Media Venture as Share Price Drops first appeared on EcoHugo.

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For transparency, this content was partly developed with AI assistance and carefully curated by an experienced editor to be informative and ensure accuracy.