The first half of 2024 has been a roller coaster ride for Trump Media & Technology Group. Since the company behind Truth Social went public, its stock price has swung wildly—as high as $66 per share and as low as $22—leading to a wealth boom and bust. of the former president.
But according to LinkedIn co-founder Reid Hoffman, these fluctuations are minor compared to the huge gap between Wall Street’s valuation of Trump Media and the company’s true value.
“The Truth Social numbers are so absurdly outside the realm of normal business. » Hoffman said CNN, referring to TMTG’s market value, which currently stands at around $6 billion. “It’s extremely high,” he said.
TMTG went public in March at a staggering market value of $6.8 billion, despite revenue of just $4.1 million in 2023. (In comparison, when LinkedIn was acquired by Microsoft in 2016, it was valued at $26.2 billion, about eight times its revenue of $3 billion. Meta, which is valued at around $1.3 trillion, had revenue of more than $130 billion last year.)
Hoffman, who is now director of Microsoftsaid CNN that if Meta’s price-to-sales ratio was in line with TMTG’s, the social media giant would be valued at nearly $150 trillion.
The last few months have been difficult for Trump Media. Within days of its IPO, its value soared to nearly $8 billion and its stock price surged. But its value has fallen after company revealed it lost $58 million in 2023eclipsing its total revenue for the year.
In May, TMTG suffered another blow when results showed it lost more than $300 million in the first quarter of 2024which was mainly related to its merger with Digital World Acquisition Corp. First-quarter revenue was also down from last year, at less than $775,000.
And as the company continues to lose money, there aren’t many ways to expand its audience. In February, Truth Social revealed that it had around 9 million user registrations across its platforms, making it tiny compared to giants like X And Snapchatwhich have 550 million and 800 million monthly users respectively.
Specifically, these signups typically represent a small fraction of people online who are ardent Trump supporters, which doesn’t make Truth Social very appealing to anyone outside of the MAGA movement. Earlier this year, Michael Pachter, director of research at wealth management firm Wedbush, said: Fortune he estimated that Truth Social had a peak market of 75 million userswhile it would need around 200 million to justify its valuation.
“Trump Media is probably better valued at close to $40 million rather than several billion,” Hoffman said. CNN. “Truth Social is spending hundreds of millions of dollars without showing anything in terms of user engagement, user growth, or even potential revenue.”
Hoffman, who has donated millions of dollars to President Joe Biden’s re-election campaign, is not the first expert to say that Wall Street overvalues Truth Social. When TMTG first went public, Jay Ritter, an IPO specialist at the University of Florida, said the company was in no way worth what the stock price suggested and that its price was ” »separated from fundamental values.»
Other investors have compared Trump Media, which trades under the ticker DJT, to meme stocks like AMC and Stoppage of playwhere value is determined more by popular sentiment on Reddit forums than by thoughtful analysis of the company’s performance and potential.
