Share Price Drops By 13.2%
Since the market closed on Friday, the company’s share price has dropped by 13.2%, settling at $44.19.
Source: Gage Skidmore, Wikimedia
This crashed down from its peak of nearly $72 during its initial public offering in March marking an 8.6% decline in the stock price.
$766 Million Loss For Trump
The crash has resulted in a loss of over $766 million for Trump, who owns 114 million shares in TMTG and holds almost 65% of the company, valued at nearly $6 billion.
Source: iStock
Company officials attributed the first quarter results to complications from a March merger with Digital World Acquisition Corporation (DWAC), a special purpose acquisition company that enabled Trump’s company to go public.
TMTG Corp Claims Company To Be “Well-Capaitalized”
“After an unprecedented, years-long process, we have consummated our merger and dispensed with the vast bulk of merger-related expenses, leaving the Company well-capitalized and supported by a legion of retail shareholders who believe in our mission to provide a free-speech beachhead against Big Tech censorship,” stated TMTG Corp CEO Devin Nunes in a May 20 statement.
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The merger incurred $311 million in non-cash expenses.
TMTG Comparable To X
Despite revenues under $1 million and a U.S. mobile user base just over 100,000, TMTG is valued at over $7 billion, comparable to a major tech company, even though competitors like X have exponentially more users.
Source: Wikimedia
The company’s report indicated that the impairment for the three months ending in March resulted in a net loss of $3.61 per share, coming at a delicate time for the company.
Auditor Accused Of “Massive Fraud”
Earlier this month, TMTG dismissed its auditor, B.F. Borgers, who was accused of “massive fraud” by the Securities and Exchange Commission, which also delayed the financial report’s disclosure.
Source: Freepik
This revelation coincided with Trump’s ongoing legal and billing challenges.
Is Poor Revenue The Cause?
Despite the poor revenue and stock decline, the company attributed the losses to other factors.
Source: Freepik
These include non-cash expenses from converting notes and eliminating previous liabilities, emphasizing a focus on future product development.
Excessive Non-Cash Expenses
“In the first quarter, the Company recorded $311.0 million in non-cash expenses arising from the conversion of promissory notes, and the associated elimination of prior liabilities, immediately before the closing of TMTG’s merger with DWAC on March 25, 2024,” the report stated.
Source: Freepik
“These non-cash expenses resulted in a GAAP loss of $327.6 million for the first quarter.”
Long-Term Product Development Over Quarterly Revenues
The Report Highlighted Several Factors.
Source: Freepik
One being that TMTG is concentrating on long-term product development rather than quarterly revenues, aiming to enhance Truth Social, launch live TV streaming, and expand its ecosystem to drive future revenue and value.
Losses Are Expected To Continue
Trump Media acknowledged that it has historically faced operating losses and negative cash flows and expects this trend to continue as it works to grow its user base and attract more partners and advertisers.
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During an episode of CNBC’s Squawk Box on April 4, media mogul Barry Diller criticized Trump Media, calling it a “scam” following the company’s public listing.
“The Company Has No Revenue”
Despite a brief increase in share value to over $79, the stock had fallen to $46 per share by April 4.
Source: Pressfoto, Freepik
In 2023, TMTG reported revenue of $4.1 million and a substantial loss of nearly $58.2 million. Diller also remarked, “the company has no revenue” and labeled its investors as “dopes.”
TMTG Investors Guilty Of Insider Trading
In early April, TMTG investors Michael Shvartsman and his brother, Gerald Shvartsman, pleaded guilty to an insider trading scheme related to Truth Social’s public listing.
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The Shvartsman brothers admitted in a New York court to one count of securities fraud, which carries a maximum sentence of 20 years, following their June 2023 arrests for unlawful trading based on private information about a shell company’s plan to acquire TMTG.