The dramatic plunge in Trump Media & Technology Group’s stock last week sent shockwaves through financial markets, leaving many investors scrambling to understand what happened to the high-profile SPAC merger that had initially soared after its public debut. As the dust settles on this market volatility, a clearer picture emerges about the fundamental challenges facing the company behind Truth Social.
Last week’s collapse saw Trump Media (DJT) shares plummet over 60% from their post-merger highs, erasing billions in market value. The company, which began trading on March 26 after completing its long-awaited merger with Digital World Acquisition Corp., had briefly reached a market capitalization exceeding $8 billion despite reporting just $4.1 million in revenue for 2023.
“This is a textbook case of a mismatch between market valuation and underlying business fundamentals,” says Morgan Stanley analyst Jennifer Harker. “The initial pricing reflected investor enthusiasm rather than traditional metrics.”
The timing of the sell-off coincided with the company’s first financial filing as a public entity, which revealed substantial losses and raised questions about its long-term viability. According to SEC documents, Trump Media reported a net loss of $58 million last year, with cash reserves of approximately $295 million following the merger.
Truth Social, the company’s flagship product and primary revenue source, faces significant competitive challenges in the crowded social media landscape. Data from Similarweb shows the platform attracted roughly 5 million monthly visitors in February—a fraction of Twitter’s 450 million monthly active users or Facebook’s 2.9 billion.
The spectacular rise and fall of Trump Media shares mirrors patterns seen in other “meme stocks” that captured retail investor attention during the pandemic. Analysis from the Federal Reserve Bank of San Francisco indicates that stocks with high retail ownership often experience greater volatility, particularly when trading volumes are concentrated among smaller investors.
Former SEC Commissioner Robert Jackson points to broader concerns: “When we see this magnitude of disconnect between stock price and business fundamentals, it’s often a red flag for potential market inefficiencies or possible information asymmetries.”
For many analysts, the core issue remains Truth Social’s business model and growth prospects. The platform, launched after former President Trump was banned from major social networks following the January 6 Capitol riots, has struggled to achieve mainstream adoption beyond its core conservative user base.
“The fundamental challenge is monetization,” explains Katherine Johnson, digital media analyst at Bernstein Research. “Most social media platforms rely on advertising revenue scaled across hundreds of millions of users. Truth Social’s relatively small user base makes that traditional model difficult.”
Inside filings reveal the company’s advertising revenue totaled just $1.1 million in 2023, with the remainder coming from subscription and technology licensing. This pales in comparison to industry leaders—Twitter generated $5.1 billion and Facebook over $115 billion in advertising revenue during their last reported full years before ownership changes.
Market volatility also stemmed from concerns about insider selling after lock-up periods expire. With former President Trump owning approximately 65% of the company—a stake valued at several billion dollars even after the decline—potential future share sales could create additional downward pressure.
The stock’s fall has had ripple effects across various market segments. Options trading on Trump Media shares exploded, with put volume reaching record levels as investors sought downside protection. Meanwhile, short sellers have taken increasingly aggressive positions, with borrowing costs for DJT shares reaching annualized rates of over 200% at one point, according to data from IHS Markit.
“The current trading environment for Trump Media resembles what we’ve seen in other highly volatile stocks where sentiment, rather than fundamentals, drives price action,” notes Federal Reserve economist Sarah Martinez in a recent research paper examining retail trading patterns.
For investors assessing whether Trump Media represents an opportunity at lower prices or a value trap, the financial metrics remain challenging. The company’s current valuation still implies a price-to-sales ratio far exceeding most established media companies, despite significant questions about its growth trajectory.
Truth Social faces entrenched competition not only from mainstream platforms like Facebook and Twitter but also from other conservative-oriented alternatives that emerged earlier, such as Parler and Gab. This fragmentation of the alternative social media space could limit the platform’s ability to build the scale necessary for sustainable profitability.
While supporters argue that Trump’s personal brand and loyal following provide unique advantages, critics question whether this will translate into sustainable shareholder value. Recent user engagement metrics from Edison Research suggest Truth Social’s active user retention has underperformed industry averages for new social platforms.
“The next six months will be critical,” says William Chen, technology sector strategist at JP Morgan. “Investors will be looking for concrete evidence of user growth acceleration and new revenue streams beyond the initial post-launch period.”
As markets continue digesting Trump Media’s volatile debut, the stock serves as a reminder of the risks inherent in investing based on sentiment rather than established business metrics. Whether Truth Social can transform from a politically-aligned platform into a commercially viable media enterprise remains the central question for investors weighing its future prospects.
