The share price of Trump Media plummeted after the company reported a net loss of $58.2 million on revenue of just $4.1 million in 2023. Despite this, the company’s market capitalization remained above $6 billion. The losses appear to be largely driven by interest expenses. The company’s previous financial statement for 2022 showed a net profit of $50.5 million on total revenue of $1.47 million. Trump Media expects to continue incurring operating losses for the foreseeable future, per the company’s filing with the Securities and Exchange Commission.
Trump’s involvement in the company poses unique risks, according to the filing. The company disclosed “material weaknesses in its internal control over financial reporting” for the first three quarters of 2023, which continue to exist. Trump owns 57.3% of Trump Media shares, valued at over $4 billion, and is set to receive an additional 36 million “earn-out” shares over the next three years based on certain stock price benchmarks. The company’s share price initially soared when it began trading under the ticker DJT after merging with Digital World Acquisition Corp., but the risks associated with Trump’s involvement in the company have been highlighted in the recent filing.
Analysts attribute the company’s high valuation partially to stock purchases by Trump’s political supporters, who are enthusiastic about owning shares in a company closely linked to the former president. This enthusiasm also creates unique risks, as outlined in the filing. Some of the risks identified include the potential for active discouragement of users, harassment of advertisers or content providers, increased risk of hacking, and criticism of Truth Social’s moderation practices. The filing also suggests that the need for Truth Social may diminish if First Amendment speech is not suppressed, which could impact the company’s performance.
Trump Media’s stock price performance will impact Trump’s potential receipt of additional shares in the company, which are contingent on meeting specific price benchmarks over the next few years. The company’s financial outlook, as indicated in the filing, anticipates continued operating losses. The company’s trading under the DJT ticker reflects its association with the former president but also underscores the unique risks that come with that association. These risks include concerns about the company’s offerings, potential hacking vulnerabilities, and possible issues related to user engagement and content moderation.
Despite the significant losses reported in 2023, Trump Media’s market capitalization remained relatively high. The company’s involvement with Donald Trump has attracted support from his political base, contributing to its valuation but also exposing it to heightened risks associated with the former president’s controversial platform and reputation. The company’s continued losses, as outlined in the filing, point to ongoing challenges in achieving profitability despite the initial excitement surrounding its merger and stock market debut. The unique risks outlined in the filing emphasize the uncertain future for Trump Media and the potential impact of these factors on the company’s performance and market value in the coming years.
