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When Donald Trump’s social media company listed on the US sharemarket last month, the former president’s net worth jumped by $US4.6 billion ($7.1 billion), rocketing him into the world’s top 500 wealthiest people and making a mockery of America’s most-prized institution, Wall Street. Not a bad day at the office for the anti-establishment candidate.
Never mind inflated real-estate valuations, at its peak, Trump Media and Technology Group, the parent company of social media platform Truth Social, was valued just shy of $US8 billion ($12.3 billion) – more than 2000 times earnings. For context, Nvidia, the world’s hottest artificial intelligence-related company, trades at 38 times earnings, while the average for S&P 500 companies is 2.8 (no, this is not fake news).
Donald Trump’s social media company listed on the US sharemarket last week.Credit: AP
You have to hand it to Trump – he’s not one to shy away from new and innovative ways to raise capital. Having tried all the “conventional” routes – NFT trading cards, Bibles, scented candles, high-top sneakers and MAGA crypto – Wall Street is now helping him fund his re-election campaign via the first political meme stock of our time.
Despite falling 50 per cent since its highest closing price, the company still has a market capitalisation of $US4.5 billion for a company that made a loss of $US58 million ($89 million) and had less than $US4 million ($6.1 million) in revenue last year.
One might think that such a lofty valuation is a “yuuuge” short, but if the pandemic meme stock era has shown us anything, it’s that some stocks can trade purely on sentiment and attention rather than fundamentals (much like Trump himself). Investing in Trump Media is less about making money than signalling that you belong to a group of like-minded people.
Wall Street is now helping Trump fund his re-election campaign via the first political meme stock of our time.
There are several reasons why going short DJT could be a recipe for covfefe.
Firstly, traders should be wary of the “low float” of shares in DJT.
Only 30 per cent of DJT’s shares are available to be publicly traded, with the majority held by Trump and other insiders. Stocks with a small float are much more volatile because there are fewer shares to buy and sell, resulting in more violent price movements. For comparison, 99 per cent of Meta shares are free-float shares available to be publicly traded.