The Truth Social network has become a kind of goose that lays golden eggs for Donald Trump. Defying economic logic, Trump Media & Technology Group (TMTG), a company with heavy losses and almost no income, is worth a fortune on the stock market. As a consequence, this Tuesday an additional award was activated for the former president. With the stock priced so high, Trump will be entitled to receive an additional 36 million shares. At the current stock market price of TMTG, that represents a bonus of almost 1.2 billion dollars (about 1.1 billion euros). The fine print, however, prevents him from making cash for a few months.
The value of these shares is added to the 78.75 million shares it already had. With this, its participation, which becomes approximately two-thirds of the company’s capital, is valued at market price at about 3.7 billion dollars. Speculation causes the price to go up and down like a roller coaster. This Tuesday it has fallen more than 8%.
Even so, after almost a month of trading on the stock market and with strong trading volumes, although the price defies logic, it cannot be ignored that there is demand willing to buy the securities at prices that have little to do with the economic fundamentals of the company. company. The bubble was deflating from the maximum of $79.38 that it reached at the end of March. The price fell to $22.55 last week, but from there it has risen strongly again to the current $32.56.
Although he has some cash problems as a result of his convictions in fraud and defamation cases and the multimillion-dollar legal expenses he is having to face in his civil and criminal proceedings, Trump is richer than ever, at least on paper. He remains to see if he can use that wealth and allocate it to cover his legal expenses and also, hypothetically, to the November presidential campaign. Until now, in fact, the money has flowed in the opposite direction: the former president has used donations from supporters to his political action committees to cover his personal legal expenses.
The stock bonus that the former president has now achieved is generated by having quoted the shares of Trump Media & Technology Group (TMTG) for 20 sessions above $17.50 since the social network went public. The arrival on the market was made just a few weeks ago through the merger with Digital World Acquisition Company (DWAC), a special company created to undertake a corporate operation.
When the initial merger agreement was signed in October 2021, the agreement provided that TMTG shares had to trade above $30 for Trump to get the full bonus. DWAC and TMTG modified the agreement in August 2023 to lower that threshold to $17.50, which has now allowed Trump to receive the 36 million share award.
TMTG, which owns Truth Social, had revenue of just $4.1 million for all of 2023. The company suffered a loss of $58.2 million, partly weighed down by the interest burden on its debt. With the merger with the DWAC company, Trump’s company accessed its liquidity of about $300 million. Once the debt has been amortized, the company now has more than 200 million in cash.
Unlike traditional social media companies, which use metrics such as active users or revenue per user, Trump Media “believes that sticking to traditional key performance indicators” could “divert its attention from strategic evaluation regarding progress and growth.” of your business,” according to the IPO brochure. When regulators asked about the number of Truth Social subscriptions and users, the company only revealed the records. The company maintained that it has achieved “an approximate total of 8.9 million registrations on Truth Social across iOS, Android and the web,” although that figure is not equivalent to the number of active users.
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