As Donald Trump's social media company, Trump Media & Technology Group Corp., begins trading publicly on the Nasdaq stock exchange, investors are questioning the potential risks and rewards associated with the stock. The company, which operates the social media platform Truth Social, was acquired by Digital World Acquisition Corp., replacing Digital World on the stock exchange.
With an initial stock price near $50 and a market value of approximately $6.8 billion, Trump Media has garnered attention from investors, particularly small-time supporters of Trump and those seeking to capitalize on the merger. However, the company has yet to turn a profit, reporting a loss of $49 million in the first nine months of last year.
Despite its financial challenges, Truth Social was launched in February 2022 as an alternative platform after Trump's ban from major social media platforms following the Jan. 6 insurrection at the U.S. Capitol. While Trump expressed optimism about Truth Social's performance, the company has not disclosed its user numbers.
Research estimates suggest that Truth Social had around 5 million active users in February, positioning it below major platforms like TikTok and Facebook but ahead of other alternative platforms. Trump Media also faces risks related to competition in the social media space and its dependence on Trump's popularity and involvement.
As a controlling stockholder with nearly 60% ownership, Trump's decisions could significantly impact the company's future. Legal proceedings involving Trump also pose potential risks to Trump Media and Truth Social, as adverse outcomes could affect the company's operations.
Recent trading activity has been volatile, with Digital World shares experiencing significant fluctuations leading up to and following the merger with Trump Media. Investors should be prepared for potential uncertainties as the company navigates its public debut and seeks to establish itself in the competitive social media landscape.
