Shares of Truth Social owner
Trump Media & Technology Group plunged Monday after the company disclosed that it lost more than
S58 million and generated very little revenue in
2023. Former President Donald Trump is the company’s majority shareholder, and his net worth tumbled by more than $1 billion Monday as a result.
The figures underscore why some experts warn
Trump Media’s multibillion-dollar valuation defies logic and is reminiscent of the meme stock craze.
In a regulatory filing on Monday, Trump Media said it lost $58.2 million in 2023, compared with a profit of $50.5 million in 2022.
The Truth Social owner generated just $4.1 million in revenue, although that was up from $1.5 million in 2022.
Not only that, but revenue tumbled 39% year-over-year in the fourth quarter to just $751,500. That’s not what investors want to see from any start-up, especially one valued at these levels.
Shares of Trump Media tumbled 21% Monday following the new filings, though they are still up nearly 200% so far this year.
Former President Donald Trump owns a commanding stake of 78.8 million shares in the newly public company. At Monday afternoon’s prices, that stake is now worth approximately about $3.8 billion. This represents a massive boost to Trump’s net worth, though it is down significantly from a peak of about $6.3 billion just last week.
The losses disclosed Monday are so severe that Trump Media’s accountants warned at the time they “raise substantial doubt about its ability to continue as a going concern,” which is Wall Street for: We may not be able to stay in business. That warning echoes one made in November when accountants said Trump Media might not survive unless it soon completes its merger to go public.
That long-delayed deal was completed last week, paving the way for Trump Media to receive an influx of approximately $300 million in cash. The company can now use those funds to pay down debt and, importantly, build out its infrastructure.
“I believe the $300 million of cash should remove this ‘going concern’ risk,” said Matthew Kennedy, senior IPO strategist at Renaissance Capital.
Michael Ohlrogge, an associate professor at NYU School of Law, told CNN in an email that it will be more telling if accounts are still giving a “going concern” warning now that the merger has been completed because the cash infusion should give the company a “decent bit more runway.”
“Although it won’t take that long to burn through the cash it raised…if they keep losing it at the rate they are,” Ohlrogge said, adding that it’s possible Trump Media can raise more cash by selling additional stock.
Even though Trump Media is losing money and generating scant revenue, Wall Street has valued the company by as much as $11 billion based on the stock’s closing price Friday, according to Renaissance Capital. By Monday afternoon, that valuation tumbled to about $8.8 billion
Peoplesmind