Why did Truth, Trump’s social network, make a splash?
The great enthusiasm, financially speaking, around former President Trump's social network seems to have faded. Especially after yesterday's bad performance on Wall Street. Facts, numbers and comments
From rags to riches. Just a week ago the forecasts on Truth, Donald Trump's social network, were bright. With the green light from investors for the listing on the stock exchange, a revenue of 3 billion dollars was assumed and on its first day on the Nasdaq it was valued at almost 8 billion dollars .
Now, however, the wind has changed and yesterday the Trump Media & Technology Group, whose flagship product is Truth, sank on Wall Street.
TRUTH'S THUD ON WALL STREET
Yesterday was a disastrous day on Wall Street for Trump's company that owns the social network Truth. Trump Media & Technology Group shares lost more than 20% during the trading day. The assets of the tycoon, the company's largest shareholder with 57% of the shares, have seen 1 billion dollars disappear so far, bringing the net value to 6.4 billion dollars.
THE CAUSES
The disappointing financial data were the driving force: according to the documents presented by the group this morning, the company generated revenues of only 750 thousand dollars in the fourth quarter, with a loss of 39% compared to the same period a year ago, a figure that brings the revenue balance in the twelve months to 4.1 million.
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WHAT THE ANALYSTS THINK
“Truth was overvalued and this reality is dragging the stock lower. Because the service has no clear path to profitability and its revenue is low, its high debut was not sustainable,” said Insider Intelligence analyst Ross Benes.
For Michael Ashley Schulman, an analyst at Running Point Capital, “Trump Media & Technology Group has enjoyed a tremendous rise thanks to hype and enthusiasm, but is far from becoming a full-fledged social media challenger to X, Instagram, TikTok and other platforms."
As Reuters notes, Reddit has 73 million active users, while Truth only reports the total number of signups, which stands at 8.9 million.
LOSSES AND AFTERMATH OF TRUMP MEDIA
In 2023 Trump Media recorded losses of 58 million, after 50.5 million profits in 2022. The tycoon, in recent weeks, has been able to rake in more than 300 million in cash thanks to the merger with another company, a figure that will allow him to face the next payment deadlines for the millionaire compensation to which he was sentenced by the New York court.
However, yesterday's crash on the stock market risks leaving its mark on its finances and even further damaging its public image. Trump holds 78.8 million shares and there is anticipation to understand how the market will react in the session that will open in the next few hours on Wall Street. The losses recorded yesterday were so sensational that they pushed Trump Media's own auditors to admit doubts about the stability of the stock and to urge caution in the coming weeks.
The billionaire is also not allowed to sell or borrow his shares for six months and any move he makes to try to alter the deal would likely trigger further sales, Reuters reminds us .
THE TROUBLES WITH THE CO-FOUNDERS
Trump Media, among other things, is also involved in a legal battle with co-founders Wesley Moss and Andrew Litinsky. Also yesterday, a Delaware judge said he would schedule a hearing this month to determine whether the two should receive the 8.6% stake in the company they claim they are owed.
Moss and Litinsky accused the group of trying to improperly dilute their stake, while the company said they failed to earn their shares and that it wants to strip them of their ownership.
TRUMP'S OTHER PROBLEMS
But for the former president of the United States it doesn't end here. As he continues his electoral campaign in search of a second mandate, he will have to face a delicate judicial appointment on April 15th. In fact, that day, in New York, the trial will formally begin in which he is accused of illegally paying a porn star, Stormy Daniels, and the former Playboy bunny Karen McDougal.
Trump is accused of buying their silence in 2016 so that they would not reveal that they had had an extramarital sexual relationship with him. A confession which, in the midst of the presidential campaign, could have jeopardized the tycoon's victory.
Finally, the day after tomorrow, April 4, he will have to pay a $175 million bail for inflating his net worth with billions of dollars a year in banking transactions.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/perche-truth-il-social-di-trump-ha-fatto-splash/ on Tue, 02 Apr 2024 08:41:40 +0000.