Why Is Trump’s Truth Social Worth Billions? The Top Theories
On the cusp of a financial crisis, Donald Trump found an unlikely source of help in his struggling social media platform. Investors approved a plan on Friday to take Truth Social public, increasing Trump’s net worth by billions as he faces legal expenses and a civil fraud case in New York state, where he owes half a billion dollars. Truth Social started trading on the Nasdaq exchange on Tuesday.
But despite the reported market capitalization of $4.7 to $5.6 billion, Trump Media & Technology Group, the owner of Truth Social, actually lost money last year according to regulatory filings. This has led many to wonder how the platform has achieved such a high valuation. Some believe that Wall Street investors are not necessarily buoyed by Trump’s social media platform itself, but rather bullish on his chances of returning to the White House.
Kristi Marvin, the finance guru who founded SPACInsider, believes that the valuation of Truth Social is a barometer for Trump’s performance in the election. Supporters of Trump may be buying the stock in hopes of supporting him, while others might see potential in the platform if he wins the presidency.
The rally of Truth Social began earlier this year, with the Special Purpose Acquisition Company (SPAC) created to merge with the platform issuing millions of new shares. Speculation exists that the company’s valuation may crash after it replaces Digital World in the stock market under its new ticker, DJT. Additionally, investors are concerned about what it would mean if Trump were to sell his shares, particularly before the election.
Last week’s initial public offering indicates that investors believe Truth Social will attract more users and increase in value if Trump defeats President Joe Biden in November. However, the election is still eight months away, and Biden has been gaining ground. Moreover, it is unclear whether Truth Social would become a widely used platform even with Trump in office, as he has other avenues to amplify his message.
Incentives for investors may go beyond political support. The largest institutional investor of the shell company that merged with Truth Social is Susquehanna International Group, owned by GOP megadonor and billionaire Jeffrey Yass. This investment may give Yass some level of access or influence that he might not otherwise have gotten.
It is worth noting that markets have frequently embraced social media companies at levels that seemingly exceed their value. Examples include Uber and WeWork. These kinds of valuations that appear insane are surprisingly common, according to Karen Petrou, managing partner of Federal Financial Analytics. Investors could be taking high risks in the hopes of high rewards, banking on the potential success of Truth Social with a Trump victory.
In conclusion, the valuation of Trump’s Truth Social is not necessarily representative of the platform’s current financial situation. It seems to be influenced more by investor speculation on Trump’s political future and the potential success of Truth Social if he returns to the White House. The market has a history of embracing high-risk, high-reward opportunities in the social media sector, and Truth Social is no exception.