(Bloomberg) -- Donald Trump’s media startup has taken investors on a wild ride, with the company shedding more than $7 billion in value from its May high to its September bottom, and then regaining nearly $3 billion in less than one month.
Nothing fundamental is driving the rally, as Trump Media & Technology Group Corp. reported just $1.6 million in sales through the first six months. And third-party tracking data show that its Truth Social platform hasn’t topped one million daily active users in the past year.
Rather, it appears to be an election gambling proxy, loosely correlated with moves in betting markets. On Sept. 23, Trump was down by three points on PolyMarket and 11 points on PredictIt, but he’s now up by 16 points on PolyMarket and five points on PredictIt. The shares have more than doubled over the same time frame.
“It’s a meme stock that is solely valued on Trump winning, because if he doesn’t win it should be worth $0,” said Matt Tuttle, CEO of Tuttle Capital Management in Riverside, Connecticut. “I just bought puts under the assumption that it’s well overdue for a pullback.”
Tuttle has a point. Trump Media, which owns the X-lookalike social media platform Truth Social, has traded more like a meme stock than a company valued on its fundamentals. In the two months since reporting second-quarter results, it has swung between $11.75 and $33.85.
That volatility was on display Tuesday, when the stock rose as much as 13% before plunging in afternoon trading on no discernible news or shift in the betting on presidential prediction sites. More than 86 million shares changed hands, marking the most active day since the aftermath of the deal’s announcement in October 2021. The stock traded at $25.80 as of 3:38 p.m. in New York.
“If they don’t have the users to make more than $1.6 million in ad marketing, where is it going to come from?” asked Dave Peinsipp, co-chair of Cooley’s global capital markets practice. “This is among the questionable things that don’t really make a lot of sense on the valuation.”
Lofty Multiple
The company’s lofty market valuation, which puts the former president’s stake at roughly $3.1 billion, is based on an extreme price-to-sales ratio near 1,700. By comparison, Rumble Inc., a right-wing video site backed by Trump’s running mate, JD Vance, has a multiple of about 16.
It’s also blowing away the performance of traditional meme stocks. GameStop Corp., the video-game retailer that drew legions of individual investors to back it, peaked at a price-to-sales multiple of about four in 2021. And AMC Entertainment Holdings Inc.’s peak was roughly 14, data compiled by Bloomberg show.
Although Trump Media shares have jumped above $30 from $11.75 just three weeks ago, they remain down 55% from their first close as a standalone company in March. Looking back to 2021 and the initial mania in when its deal to go public was unveiled, powering the SPAC shares to an intraday peak of $175, it has lost more than 80%.
“Will there be any value in the stock if Donald Trump is not president or will there be a huge jump for the stock if he is?” asked Peinsipp. “It’s a completely unique case study from what we traditionally see.”
Trump has stuck by a promise to not sell shares through at least last Friday, the earliest day such a move would have been disclosed, and retains his nearly 115 million share stake. Meanwhile, the former contestants on Trump’s TV show The Apprentice who co-founded the company quickly sold the vast majority within a week of being able to sell.
Judging Performance
One of the challenges for investors is assessing how the business actually is doing. Trump Media has said it may never disclose performance metrics like average users or revenue per user — things that most other publicly-listed companies regularly provide.
“Trump Media ended last quarter with $344 million in cash and cash equivalents and zero debt while launching an in-app streaming platform on our custom-built content delivery network,” a company spokesperson told Bloomberg in a late September email. “With further innovations planned soon, TMTG is optimistic about our growth strategy.”
The app has failed to top one million daily active users in the past years, less than 1% of the traffic Elon Musk’s X gets, and were just under 400,000 for September, data compiled by the research firm Apptopia show. By comparison, Pinterest reported global monthly active users of 522 million in the second quarter, while Snap’s figure was more than 850 million. And X had nearly 145 million daily active users in September, Apptopia data show.
Another area Truth Social also is lagging is user engagement, with users only averaging 4.8 minutes per day on the app in September, according to Apptopia data. On Rumble, the average time spent by users per day was above 50 minutes from July through September.
“This is clearly a business that cannot support the price even after the decline, there’s nothing that justifies the price,” said Brian Quinn, a law professor at Boston College. “This is not a business worth $6 billion.”
(Updates with share movement throughout, adds detail in sixth paragraph.)
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