As discussed in my last post, earlier this week a SPAC called DWAC officially acquired the Trump-owned parent of social media concern Truth Social, TMTG. The merged company is called TMTG, but its stock ticker symbol is DJT. Which is particularly appropriate here, since the market price of DJT appears to be almost entirely disconnected from the fundamentals of TMTG as a business venture.
A very instructive comparison is Reddit, the social media concern that had its IPO last week. Reddit stock has performed quite strongly, with the IPO price being at the top of the suggested range, followed by a very nice day one pop, and continued price appreciation since then. The stock closed down today, at about $58 per share, giving it a market capitalization of $9.2 billion. While Reddit has never been profitable, it did have $800 million in 2023 revenue, and it has 73 million active daily users and 267 million active weekly users. To my tastes as a value-oriented investor, RDDT is massively over-priced; but at least it is an established company, with real revenue sources, and a large, devoted user base.
TMTG, by contrast, only reported $3.4 million of revenue for the first nine months of 2023, on which it had $10.6 million of operating losses. It has never reported active user counts, unlike other social media platforms, but external parties have estimated that Truth Social has maybe 1 million active monthly users. And yet… at today’s closing price of about $66 per share, TMTG’s market capitalization is $9.4 billion, slightly more than Reddit’s.
If RDDT is, arguably, massively over-priced, what words suffice to describe the extent to which DJT is over-priced? Clearly, the market for DJT stock has almost nothing to do with TMTG the company, and everything to do with Donald J. Trump the personal brand. With Trump’s paper net worth having gone up by billions this week, it will be interesting to see how much cash he can ultimately realize from his TMTG holdings, and what the eventual path of TMTG’s stock price looks like.
However, the immediacy of Trump’s potential need to convert TMTG stock to cash was alleviated on Monday by a New York appellate court decision in the Trump Org fraud case, reducing the amount of his appeal bond to $175 million and giving him a further 10 days to post the bond. The appellate court decision also stayed many of Judge Engoron’s findings, such as the order prohibiting Trump and his sons from serving as an officer of a New York corporation, pending appeal; however, the appellate court did not stay the requirements for an independent monitor over Trump Org, or for Trump Org to hire an independent director of compliance.
In other news, yesterday the Democrats unexpectedly won a by-election for an Alabama State House seat. In 2022 the Democratic candidate, a white woman named Marilyn Lands, had lost the seat 45-52. The victor was then indicted for voter fraud and resigned his seat several months ago. Lands ran again and this time focused her campaign on reproductive rights, which is currently a hot-button issue in Alabama due to a State Supreme Court decision several week ago that frozen embryos are human beings. She won yesterday by the surprising margin of 62-38, continuing to underscore the extent to which the Dobbs decision is impacting the electoral landscape in red states.
However, perhaps the most important political news of the week came on Monday, when Judge Merchan announced that the criminal trial in New York v. Trump (the hush money case) would indeed commence on April 15th.