The dismal case study of Trump Media & Technology Group

In its own eye-rolling words, TMTG, the operator of the Truth Social platform, “aspires to build a media and technology powerhouse to rival the liberal media consortium and promote free expression. TMTG was founded to fight back against the big tech companies—Meta (Facebook, Instagram, and Threads), X (formerly Twitter), Netflix, Alphabet (Google), Amazon and others—that it believes collude to curtail debate in America and censor voices that contradict their woke ideology. TMTG aims to safeguard public debate and open dialogue, and to provide a platform for all users to freely express themselves.”

All right then. The company started trading publicly on March 26, 2024; the financial statements included in the related prospectus filing became stale-dated within about a week or so (not too unusual in itself) and were updated as part of a 10-K Annual Report filed on April 1. These indicated that for the year ended December 31, 2023, the company earned revenue of $4.2 million and incurred a total loss of $58.2 million, consuming $9.7 million of cash in its operating activities; the company had total liabilities exceeding $70 million (although more than half of this consisted of promissory notes convertible to equity), against total assets of $3.4 million. This is from the BBC’s reporting on April 2nd:

• Shares of Donald Trump’s social media company fell by more than 20% on Monday, less than a week after it began publicly trading under the DJT ticker.
• The drop comes after Trump Media & Technology Group reported it had lost nearly $60m (£48m) last year while only bringing in around $4m in revenue.
• The price plunge caused the former president’s net worth to shrink by $1bn, according to Bloomberg.
• Shares had surged last week, giving the company an $11bn valuation.
• But experts warned the stock was bound to tumble, as its main product – Truth Social – loses users and burns cash.
• The price spike drew comparisons to the pandemic-era “meme stock” mania, when the share prices of companies like GameStop and AMC soared even though basic parts of their businesses, such as revenue, were weak.
• …The surge has been driven by small-time investors, at least some of whom appear to be showing support for the former president as his legal troubles, and the bills that accompany them, pile up.

As I post this, the stock price has kept on falling, and is now some 70% lower than its $79 high. Of course, the annual statements only confirmed what was already evident: that the initial valuation was comically misaligned with economic reality and potential, even by “meme stock” standards. Not that the company’s filings are much help in determining what that economic reality might be:

• At this juncture in its development, TMTG believes that adhering to traditional key performance indicators, such as signups, average revenue per user, ad impressions and pricing, or active user accounts including monthly and daily active users, could potentially divert its focus from strategic evaluation with respect to the progress and growth of its business. TMTG believes that focusing on these KPIs might not align with the best interests of TMTG or its shareholders, as it could lead to short-term decision-making at the expense of long-term innovation and value creation. Therefore, TMTG believes that this strategic evaluation is critical and aligns with its commitment to a robust business plan that includes introducing innovative features and new technologies.

Obviously, if there’s one thing that distinguishes Trump and all his ventures, it’s a calm and rational focus on the big long-term picture. Regardless, it’s clear that Trump himself has far fewer followers on Truth Social than he previously had on Twitter/X, and that the platform as a whole is fairly sparsely used (the BBC article cites an estimate of some five million active monthly users). Extending the lack of transparency, the MD&A gives little insight into what the company’s revenue actually represents, for example into underlying trends or patterns:

• Revenues increased by approximately $2.66 million for the twelve months ended December 31, 2023 compared to revenue of approximately $1.47 million for the period ended December 31, 2022. The increase was primarily the result of enhanced early-stage testing of a nascent advertising initiative on TMTG’s Truth Social platform, which resulted in advertising revenues of $4.13 million for the twelve months ended December 31, 2023.

It’s even more deficient in discussing the company’s overheads:

• General and administrative expense (exclusive of depreciation and amortization) decreased by approximately $1.47 million, or 14.2%, for the twelve months ended December 31, 2023 compared to the period ended December 31, 2022, driven by a $1.36 million aggregate decrease in rent, travel and entertainment expenses, staffing-related costs, and office supplies.

One might ask why a long-term-growth oriented company would be cutting back in such core areas, but no insight is provided. Anyway, as if all of this wasn’t dismal enough, Trump promptly sued two co-founders of the company, alleging they don’t deserve their 8.6% stake in the company- he claims they “failed to properly set up the corporate governance structure of Trump Media, launch his Truth Social platform and find an appropriate merger partner.“ And if nothing else, the notion of Trump taking aim at anyone else’s governance prowess seems consistent with his regularly norm-bending barrage through life. To summarize, the company is a squalid abomination, contributing nothing to society except daily torrents of Trumpian ugliness; nothing to the economy except yet another Trumpian grift (which despite everything, has succeeded in greatly enhanced his net worth, even if only on paper for now). That’s all in the 10-K too, although, you know, not expressed quite as succinctly…

The opinions expressed are solely those of the author.