“I LOVE TRUTH SOCIAL,” wrote Donald Trump following fevered trading in Trump Media, the company behind Trump’s social network.
As well he might. At one point, the company was valued at over $10 billion (€9.3 billion) after going public on Tuesday.
Let’s be blunt – the valuation is nuts.
Truth Social has never taken off as a social network, and the loss-making company brought in revenues of less than $3.5 million in the first nine months of 2023. Contrast that with the infinitely more popular Reddit, which has a similar market capitalisation ($8.4 billion) following its recent initial public offering (IPO), despite bringing in $804 million in revenues last year.
[ Trump social media firm jumps 58% in first day of trading as public companyOpens in new window ]
Flotation expert Professor Jay Ritter, known as Mr IPO on Wall Street, is one of many warning about the Truth Social valuation, saying the stock will likely eventually lose 95 per cent of its value.
[ Trump's Truth Social is the saddest site on the internetOpens in new window ]
Still, meme stocks such as Trump Media can stay high for some time, as we saw with GameStop and AMC. The former has fallen 85 per cent since peaking during 2021′s meme stock mania while AMC collapsed from $231 to below $4, but it took some time for the bubbles to deflate. Eventually, fundamentals reassert themselves, but timing is tricky. For now, betting against Trump’s army of enthusiasts may be as risky as joining them.
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