In a notable downturn for Trump Media & Technology Group (TMTG), the company behind the Truth Social app, financial disclosures reveal a significant net loss of $58.2 million for the year 2023, with revenue amounting to just $4.1 million. The news sent shares plummeting more than 22% in trading, casting a shadow on the company's prospects and its ties to former President Donald Trump.
Despite the steep decline in share price, Trump Media's market capitalization still stands at over $6.8 billion, indicating the continued market interest in the company. However, the company's financial health appears precarious, with a spokesperson attributing much of the net loss to $39.4 million in interest expense.
Trump Media's trajectory has been closely monitored since its public debut, fueled by a SPAC merger, which saw former President Trump's net worth potentially bolstered by over $5 billion. However, concerns over the company's performance have been exacerbated by the latest financial disclosures, with investors grappling with the implications of Trump's involvement and the company's struggling social media platform, Truth Social.
The tepid growth of Truth Social, launched in response to perceived censorship on other platforms, is underscored by Trump's relatively modest following of 7 million users compared to his 87 million followers on Twitter (now known as X), where he has not returned since being banned after the January 6 attacks. Despite his financial stake in Truth Social, Trump's diminished online presence raises questions about the platform's ability to attract and retain users.
Trump's financial interests in Truth Social have been closely intertwined with his legal battles, including mounting legal bills and a recent civil fraud case in New York. While a judge has reduced Trump's bond in the case, his finances remain under scrutiny, highlighting the significance of Truth Social's performance for the former president's financial standing.
The latest SEC filings also reveal a six-month lockup period for Trump and other shareholders, preventing immediate sales of shares, a provision aimed at safeguarding against market volatility. However, speculation persists about the potential for a waiver that would allow Trump to sell shares, a decision ultimately in the hands of the company's board, which includes his son, Donald Trump Jr.
Amid these challenges, TMTG acknowledges "material weaknesses" in its internal controls over financial reporting, further clouding the company's outlook. The disclosure warns shareholders of the unique risks associated with Trump's involvement, including potential user discouragement, advertiser harassment, and increased susceptibility to hacking, among others.
As Trump Media grapples with financial setbacks and questions over its social media platform's viability, the company faces a critical juncture in its efforts to establish itself as a prominent player in the digital landscape. The revelations underscore the complexities of navigating the intersection of politics, technology, and finance, with implications reaching far beyond the company's balance sheet.
