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The Truth About Truth Social
"This is a small company that is not growing and is losing money hand over fist," said Jay Ritter of the University of Florida. Anna Barclay/Getty Images
It's been just over a month since Trump Media & Technology Group — ticker symbol DJT — started trading on the Nasdaq. The initial public offering has come with lawsuits, wild swings in the share price and potential windfalls for former President Donald Trump.
We recently learned from a regulatory filing that the company has issued around $1.5 billion worth of new shares of stock to Trump himself. As of Thursday, Trump Media had a valuation over $6.5 billion.
"Marketplace Morning Report" host David Brancaccio spoke with Kimberly Adams, our senior Washington correspondent, about the company's latest moves.
The following is an edited transcript of their conversation.
David Brancaccio: That valuation fluctuates with the stock price. But what do we know about what the pros call the "fundamentals," under the hood of this company? How's it doing?
Kimberly Adams: It depends on who you ask. Obviously, they say they're doing great. Trump Media is the parent company of Truth Social, which is obviously the preferred platform for the former President Trump, but it's not a very big platform. There are estimates that it just has about 5 million monthly visitors, compared to, say, 3 billion active users on Facebook.
Jay Ritter teaches finance at the University of Florida and is an expert on IPOs. And he says it's hard to justify the current share price.
Jay Ritter: Its sources of revenue are paid subscribers and advertising revenue, and neither of them is growing. The indications are it's actually losing subscribers, and its expenses are vastly in excess of the $4 million of revenue that it's bringing in. So this is a small company that is not growing and is losing money hand over fist.
Adams: It's basically a meme stock with the price being driven up by retail investors, often fans of the former president who see this as a way to support him.
Brancaccio: And why did DJT the Republican standard bearer get the additional shares, which will certainly help him in the personal wealth department?
Adams: Yeah, Trump is the majority stakeholder in the company, and he did just get an even bigger share of the company. So Trump Media went public by merging with a SPAC, a special purpose acquisition company. And as part of that merger agreement, if the stock price stayed at about $17.50 for 20 consecutive trading days, which it did, Trump would get an extra 36 million shares in the company. That brings his total to 114 million, almost two-thirds of all the shares available. So here's Jay Ritter at the University of Florida again.
Ritter: So the price has gone up, and the number of shares has gone up. And when you take these two things into account, his paper wealth has almost doubled in the last two weeks to $5 billion in this company.
Adams: But Trump can't sell those shares until September unless he gets a waiver from the company's board, which is likely since that's made up of his family and inner circle. But it would need [Securities and Exchange Commission] approval. And Ritter says it's going to be hard for Trump to convert all this to cash anytime soon. Of course, if the price of the stock goes down before Trump sells, which many short sellers are hoping it will, that would decrease how much the former president stands to make.
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Dump Trump. Buy These 3 Social Media Stocks Instead
InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Though Trump's social media stock, Trump Media & Technology Group (NASDAQ:DJT), had an initially compelling value proposition, the intervening years haven't been kind to the company. Truth Social, the primary social media platform under the broader corporate umbrella, came about as a less censorious alternative to social media companies like X (known at the time as Twitter).
In the years between its launch and eventual special purpose acquisition company (SPAC) merger, Elon Musk realigned X into a more widely permissible public forum, and a range of alternative social media venues stepped up to cover other gaps in consumer preference. Unfortunately for shareholders, this leaves Truth Social and Trump Media & Technology in a tricky position moving forward.
Trading at a truly shocking 700x revenue with rapidly dwindling download rates, Truth Social is far from the top pick among alternative social media stocks in today's market — but these three may offer improved prospects.
Rumble (RUM)
Source: rafapress / Shutterstock.Com
Rumble (NASDAQ:RUM) is the social media stock most directly analogous to Truth Social. Branding itself as a YouTube alternative that platforms alternative political pundits alongside more mundane (and traditional) video fare means that Rumble can target multiple consumer swaths. By including disenfranchised mainstream platform refugees alongside more mainstream watchers diversifying their viewing habits, Rumble narrowly targets both sales streams in a recipe for success as the social media stock grows.
Rumble's multi-niche targeting plan is already bearing fruit a few months after closing a deal with Barstool Sports to offer viewers a full range of the sport site's video content alongside advertising opportunities for both parties. Rumble's performance is improving across multiple indicators, including monthly active users, active live viewership, and app downloads. Likewise, the company's end-of-year revenue more than doubled in 2023 compared to 2022. We'll need to wait a few weeks before Rumble posts first-quarter financials. Still, if other leading indicators prove reliable, investors should expect big things from this social media stock moving forward.
Braze (BRZE)
Source: weedezign via Shutterstock
Social media advertising technology is undergoing a silent but steady series of transformations as digital consumer trends evolve and influencer or creator-centric media replaces legacy fare like cable. While venture capital continues to flow into private adtech companies, publicly-traded Braze (NASDAQ:BRZE) stands out as an up-and-coming social media stock perfectly positioned to capitalize on these emerging marketing trends. Braze helps brands to manage multichannel marketing across all major digital platforms with a fresh and unique approach.
Unlike legacy adtech companies that target consumer segments with aggressive campaigns, Braze navigates consumer engagement more effectively. It manages curated journeys accompanying users across platforms, providing a personalized and unique experience. This personalization fosters a mental connection between the user and the brand, often converting potential customers quickly. This effectiveness is why prominent names like Match (NASDAQ:MTCH), NASCAR, and Restaurant Brands International (NYSE:QSR) take advantage of Braze's unique services.
Braze isn't yet profitable and admittedly trades at a premium, though far less overvalued than Trump Media & Technology, considering it trades at "just" 8x sales. Still, Braze is a leader in emerging advertising trends, and early entrants like Braze often need a bit of time to build momentum and generate word of mouth among top-dollar corporate clients.
Meta Platforms (META)
Source: rafapress / Shutterstock.Com
Though a far cry from alternative social media stocks, Meta Platforms (NASDAQ:META) is rapidly right-sizing operations and, by watching X's growth post-Musk, may be positioning itself to realign company values with changing consumer preferences for freer speech and greater diversity of opinion. Though often tagged as a platform for Boomers, Meta is on track to remain dominant among Gen Z audiences, which may increase further as TikTok's short-term future comes into question.
While Mark Zuckerberg's metaverse vision has faced delays, shifting towards virtual reality as a staple in future digital and social interactions seems inevitable. Despite a dip in interest in metaverse-style fashion shows and real estate ventures due to technological and accessibility challenges, demand in this sector is steady (if not spectacular). To that end, Meta's metaverse initiative stands poised to dominate the burgeoning social media landscape even if initial rollout operations were a bit premature.
When you add its forward-thinking outlook to its existing base of over 10 million active advertisers who pay premium rates for visibility on users' feeds, Meta clearly ranks as a top social media stock to anchor a diversified portfolio including other, alternative social media offerings.
On the date of publication, Jeremy Flint held a long position in RUM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.Com Publishing Guidelines.
Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy's work can also be found at www.Jeremyflint.Work.
More From InvestorPlaceThe post Dump Trump. Buy These 3 Social Media Stocks Instead appeared first on InvestorPlace.
Truth Social To Launch Its Own Live TV Streaming Platform
Former President Donald Trump's social media platform is preparing to launch its own streaming service, which will play live television and other programs.
Trump Media & Technology Group Corporation, the operator of Truth Social, has revealed that it has been conducting tests on the platform for six months, and that it is ready to move forward. The content featured on this platform will focus on live television from news networks and religious channels, and will also include content being suppressed on other services.
"We're excited to move forward with the next big phase for Truth Social," TMTG CEO Devin Nunes said. "With our streaming content, we aim to provide a permanent home for high-quality news and entertainment that face discrimination by other channels and content delivery services. There is a lot of great content that simply can't find an audience for unjust reasons, and we want to let these creators know they'll soon have a guaranteed platform where they won't be cancelled."
The download screen for the Truth Social app is seen on a laptop, Wednesday, March 20, 2024, in New York. Trump Media & Technology Group Corp. Said Tuesday, April 16, that it has been testing on its Web and iOS platforms for six months and has completed the research and development phase of the project. (AP Photo/John Minchillo, File) The implementation of this platform on Truth Social will take place over three waves, with the first wave introducing live television to Truth Social's Android and iOS apps and website. The second phase will see Truth Social's streaming apps released for smart devices, while the final phase will see the app launch on televisions.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
Truth Social was launched in early 2022, about a year after the former president had his Twitter account suspended after the Jan. 6 Capitol protest. His account was later restored in November 2022, with Twitter rebranding as X in July 2023.
The stock value in TMTG has seen a noticeable dip since the start of this month, with the latest dip in value occurring yesterday. Trump, being the majority shareholder of TMTG, lost about $470 million in net worth after Monday's drop.
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