Trump Media’s Roller Coaster: Stock Drop and Meme Stock Behavior

TFD – Delve into the roller coaster ride of Trump Media & Technology Group’s stock, marked by a significant drop and meme stock behavior. Discover the challenges and opportunities faced by Trump’s social media corporation in navigating the volatile financial landscape. Stay informed about the latest updates in this intriguing financial narrative.

Recall how Wile E. Coyote would always run off the brink of a cliff in the Road Runner cartoon, only to tumble when he looked down and realized the earth was no longer beneath his feet?

For investors in Trump Media & Technology Group, the embattled owner of Truth Social, that is essentially what transpired on Monday.

In case you missed it, Trump Media’s stock dropped 21% when the business revealed that it almost went bankrupt last year and might not have made it through without the infusion of funds it received from the merger with a shell company last week, which enabled it to go public.

The stock has gained around 200% over the last six months despite Monday’s drop, giving it an absurdly high valuation of $6.6 billion. In addition, it significantly increased the former president’s personal wealth—despite the fact that he lost about $1 billion in Monday’s selloff alone, according to my colleague Matt Egan. The former president holds a 54% interest in the corporation.

Let’s face it, Wall Street frequently has no problem funding financially struggling businesses as long as there is a healthy flow of capital and a clear route to profitability. That isn’t the situation at hand.

Just $4.1 million was made by Trump Media, also known as TMTG, in income last year. In other words, the stock is currently trading at almost 1,500 times its yearly sales. That degree of separation is unmatched even by the frothiest of AI stocks.

Dan Primack of Axios stated, “It’s not possible to even pretend that the equity value has any relation to the underlying business.” “At this point, owning TMTG is essentially giving Donald Trump an in-kind donation.”

101 Meme Stocks

This is classic meme stock behavior, as I noted last week when the Trump Media’s enthusiasm turned from a simmer to a boil. The people buying up the shares are motivated by something else entirely, something more akin to religious zeal or whatever term we choose to use to describe the Extremely Online force that transforms otherwise reasonable people into agitators and activists.

That makes predicting the outcome of this whole process nearly impossible. Remember that this internet-fueled trading, which we loosely call “meme stock-ery,” is relatively new. Up until January 2021, when a group of inexperienced day traders united on Reddit to propel GameStop shares to unprecedented heights, the term “meme stock-ery” didn’t even exist.

However, investors might want to grab on tight if Trump Media is a replay of past events, or even mirrors them. After rising above $100 a few days earlier, GameStop’s stock collapsed, and everyone assumed the company was done.

Most of us didn’t realize how committed the Reddit community was to the stock and the David vs. Goliath story that surrounds it. GameStop took three years to return to Earth.

In conclusion, Trump and his social media corporation are far from out of the game after Monday’s setback. (After all, the coyote usually stumbles, gets back up, and keeps chasing after prey.) However, the ensuing days, weeks, months, and maybe years will probably be quite the roller coaster.