Trump Media & Technology Group (DJT) shares closed firmly lower in early Monday trading, but are still sitting with a market value of more than $6.5 billion after Securities and Exchange Commission filings disclosed wide losses and revenue declines in its most important business.
Trump Media, which owns the Truth Social social media network founded by former President Donald Trump, made an updated filing with the SEC late last week showing a 2023 loss of around $58 million.
The group's fourth-quarter revenue, according to the filing, slipped to less than $1 million from $1.07 million in the three months ended in October, while the full year total was pegged at $4.13 million.
That compares to around $5.22 billion in revenue for Twitter, Truth Social's largest microblogging competitor, over the last year in which it traded as a public company before Elon Musk's $44 billion takeover in 2022.
STEFANI REYNOLDS/AFP via Getty Images
Twitter's last public release on user information estimated its daily active base at around 238 million in June 2022. Truth Social said it had around 9 million subscribers but hasn't said how many are active on the platform at a given time.
Truth Social's going-concern warning
Reddit, with around 73 million daily active users, carries a market value of $7.5 billion following its NYSE listing earlier this month.
Adeptus Partners, the accounting firm that audited the financial statements of Digital World Acquisition Corp., the Nasdaq-listed entity that merged with Trump Media & Technology, also said there was "substantial doubt about the ability of Digital World to continue as a going concern" based on its end-of-year analysis.
"As of Dec. 31, 2023, and 2022, management had substantial doubt that TMTG will have sufficient funds to meet its liabilities as they fall due, including liabilities related to promissory notes previously issued by TMTG," the company itself said.
The former president's ownership stake in TMTG was pegged at 78.75 million, or around 57.3%, of the shares outstanding, according to the SEC filing.
ARC Global Investments, which is run by the former DWAC executive Patrick Orlando, and United Atlantic Ventures, formed by Wes Moss and Andrew Litinsky, own 6.9% and 5.5% respectively.
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Litinsky, Moss, and Orlando have sued TMTG after disagreements over the sizes of their stakes in the DWAC merger.
Trump and other company insiders are bound by a lockup period, which prohibits the sale of their shares for at least six months, starting from its debut on the Nasdaq last week.
The former president is facing an $83 million payment linked to a civil suit brought by the writer E. Jean Carroll and a $175 million bond tied to his having been found liable for civil fraud in a New York real estate case. A state appeals court had reduced the bond; Trump is facing a $454 million judgment in that case.
Apart from those judgments, The New York Times has estimated, using figures from Federal filings, that Trump has spent more than $100 million on lawyers and other legal costs since he left office in 2021.
Jim Cramer on the stock surge of Trump media and technology group.. pic.twitter.com/mLty7CJEhS
— A (@gnallspiken1) March 30, 2024
Trump could petition the TMTG board to alter or remove the lockup entirely, but any move to sell a large portion of the shares, given the relatively small number of large investors holding the stock, would certainly be complicated by the group's lack of a compelling financial narrative.
On the other hand, Trump supporters could continue backing the stock with new purchases, enabling him to borrow money against their value, in both a quasi-fundraising effort and a bet on Truth Social's value should he win reelection in November.
The Big Short?
Plenty of investors are more than willing to bet against that thesis, according to data from S3 Partners, which tracks short-selling activity across a host of U.S. stocks.
Investors had bets valued at around $168.6 million last month, or 11.7% of the float outstanding, a figure that's up from around 58% from the beginning of the year.
Short-sellers bet against a company by borrowing shares and selling them. If the price of the stock declines, the short-sellers will buy back the shares at a lower price, return the borrowed stock (while paying a fee), and pocket the difference.
"Due to the lack of stock borrow supply we have not seen the recent surge in short selling that is expected when a stock’s price is as volatile at DJT\DWAC," S3 Partners said in a report published on March 26.
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The group said borrowing TMTG shares is tricky given that big holders such as ETFs don't normally own SPAC shares, and pension funds, which track major indexes, don't hold them either.
"In addition, most retail shareholders are not lenders into the stock loan market, which also limits the number of shares in the lending pool," S3 Partners said.
TMTG shares closed 21.5% lower on the session at $48.66, a move that would still leave the stock with a 2024 gain of around 180% and a market value of around $6.6 billion.
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