Yes, the “Trump” name remains, but DJT’s brand valuation is slipping. No longer does Donald Trump need Truth Social for communication or DJT stock for clout.
So, why is that bad news? Because Trump Media’s weak fundamentals are beginning to outweigh the former Trump-brand, meme-stock popularity.
This about-face valuation shift is not unusual for SPAC-merger companies. Most are now selling well below their original $10 offering prices, with many in the low single digits. Some companies even have resorted to reverse splits (for example, a 1:5 split, that exchanges 20 new shares for 100 original shares, thus increasing the share price from, say, $0.50 to $2.50). The purpose is to raise the stock price back up to meet the Nasdaq listing requirements. Then, there are the companies that didn’t make it and either shut down or were swallowed up by another entity.
Trump Media’s weak fundamentals
From The New York Times (Oct. 23), “Trump Media’s Soaring Share Price Masks Internal Strife”
- The confidential employee whistleblower report to the board revealed CEO Devin Nunes’ negative management decisions and actions/inactions
- The number of employees has been shrinking, even as the company launches Truth+ streaming. (The company has not provided an official employee count since 2023)
- The low Truth Social usage numbers are dismissed as being irrelevant (CNBC also reported this fact earlier – See “Trump Media Stock (DJT) – CNBC’s Concerns Are Serious”)
From the Trump Media 3rd quarter earnings report (released on Nov. 5)
- The minimal, stagnant revenues continue (only about $1 million per quarter for the past seven quarters)
- DJT stock continues to be used as currency to buy products and services
- The new SEPA Cayman Islands fund setup was used during the third quarter. Trump Media sold 17M new shares of DJT stock to raise $340M in cash even as the price was falling. (The sale prices ranged from $36.13 down to $14.31, with an average of $19.31)
Trump Media’s weak technicals
The election-driven boost peaked at $55 on October 29th. That was the seventh time an uptrend ended there this year. But the November 6 final election results produced only a fleeting rise to $45 that quickly petered out, ending the day at about $35. Then the stock quickly broke below the $35 barrier and is now attempting to stay above $25.
Why has the Trump brand suddenly lost its oomph? Some say it was the “buy the rumor, sell the news” strategy. Perhaps, but such actions do not result in a 50% decline. Moreover, note that the $55 top preceded the election news by seven days, and the quick $45 bump and reverse showed something was amiss.
So, what’s going on? It looks like negative fundamentals are to blame for reversing the previous bullish technical picture created by the popular meme-stock, Trump brand drivers.
The bottom line – In the end, fundamentals win
For Trump Media stock, that could mean a harsh, self-generating selloff.
“Harsh” because any net selling by today’s shareholders will not be offset by fundamental opportunists buying. The spread is simply too large between today’s stock prices and DJT’s low single-digit valuation.
“Self-generating” because management’s ability to use the stock as currency or to sell to raise cash will decline with the stock price. That negative link harms the fundamental valuation. Moreover, with management forecasting negative earnings into the future, staying afloat could become a serious concern.
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