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Newly published figures from Trump's media company Truth Social show the discrepancy between investors' assessment and actual business development.
Washington DC - Former President Donald Trump's social media company announced Monday that it lost more than $58 million last year. Just days after a high-flying stock market debut that valued the company at more than $8 billion, shares plunged more than 21 percent.
Trump Media and Technology Group, which owns Truth Social, said in a report to the Securities and Exchange Commission that the company had revenue of just over $4 million last year, including less than $1 million in the most recent quarter.
New financial figures show: Truth Social shares are plummeting
The company's plummeting stock price - which uses the ticker symbol DJT for Trump's initials - fell to its lowest level since Trump Media's IPO last week, taking more than a fifth of its market value in a single day. The value of Trump's 57 percent stake in the company also fell by around $1 billion to $3.8 billion.
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The new financial figures illustrate the discrepancy between the valuation of Trump Media on the stock market, which was hyped by investors, and the actual business development.
Trump's financial lifeline: really a rescue from debt?
They also raise questions about the possibility that Trump could use the company as a financial lifeline. Because of a provision in the company's merger agreement, known as a lockup, Trump cannot sell his shares or use them as collateral for a loan for six months.
The company's board could vote to waive that provision but has not yet done so, the filings say. An early exit could send the stock price further lower by flooding the market with shares and undermining investor confidence in Trump's commitment to the brand, financial analysts said.
Trump, who has no money invested in Trump Media, received 78 million shares of the company's stock last week and will make millions more over the next three years if the stock price stays above $12 to $17, the filings show.
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$16 million in operating losses: Hope in expanding user base
Trump Media said in a filing that it expects more "operating losses and negative cash flows" as it works to expand its user base, but that it expects its growth to come from Truth Social's "overall appeal."
The company said in a filing that its management had "substantial doubt" late last year that it would have enough money to pay its debts when they came due. The company paid nearly $40 million in interest costs last year and recorded operating losses of about $16 million.
Former President Trump speaks to a crowd at a rally in Rome, Georgia, on March 9. © David Walter Banks/The Washington Post.
Trump's company unlocked nearly $300 million in investor money last week when it struck a merger deal with Digital World Acquisition, a special purpose acquisition company that helped take Trump Media public.
Trump Media said in a report that it plans to use some of that money for "strategic investments" in marketing, advertising sales and other technologies. About $18 million of that was also paid for a settlement with the SEC announced last year.
Company keeps information secret: Experts suspect long-term downward trend
The company has declined to provide performance indicators common in the tech industry, such as: B. the number of active users, and said it may continue to withhold such numbers. Focusing on these numbers, the company said, “may not be consistent with the best interests” of Trump Media or its shareholders.
Trump Media's wild rollercoaster ride in recent weeks has led some observers to view the company as a "meme stock," whose value depends less on fundamentals and more on investors' personal feelings about its namesake brand is derived.
This separation of stock value from the company's ability to make money could hurt it in the long run, said Jay Ritter, a finance professor at the University of Florida, who predicted further declines in the stock price.
“The stock will almost certainly remain extremely volatile, with some big ups and downs on a daily basis,” he said. But “the long-term trend will be downwards.”
Compared to other online platforms: Trump's media company does not reach a wide audience
Trump Media, which makes its money from advertising on Truth Social, is struggling to attract a broad audience after two years of operation, according to estimates from online analytics firm SimilarWeb. According to estimates, Truth Social's website received its highest number of visitors of the month with around 277,000 US visitors on the company's first trading day last week.
That's just a fraction of most online platforms: On the same day, the discussion forum service Reddit was estimated to have more than 32 million visitors in the USA. Reddit, which went public a few days before Trump Media and trades at a similar share price, generated $800 million last year, more than 200 times Trump Media's 2023 revenue.
Trump's company said it has begun testing "state-of-the-art technology that supports video streaming and provides a 'home' for abandoned content creators," which it "intends to acquire and integrate into its product offerings and/or services as soon as possible." The company did not respond to a request for comment seeking further details.
The company's board of directors: all Trump advisors
Trump Media's board includes Trump's son Donald Trump Jr., Robert E. Lighthizer, Trump's former trade representative, Linda McMahon, his former Small Business Administration administrator, and Kash Patel, who served on Trump's National Security Council and from Trump Media last year received $130,000 a year as part of a consulting contract.
Trump Media's chief executive, former Republican congressman Devin Nunes, received 115,000 shares, a stake now worth more than $5 million. He and other board members are bound by the same agreement.
Nunes will receive a salary of $750,000, which can be increased to $1 million within two years, the filings show. The company's chief financial officer, Phillip Juhan, and chief operating officer, Andrew Northwall, will each receive about $350,000. Nunes, Juhan and Northwall will also each receive $600,000 “retention bonuses” this month.
Dan Scavino Jr., Trump's White House social media director and adviser to his 2024 presidential campaign, also received $240,000 last year under a consulting contract that identified him as an independent contractor, the filings show. He also receives a bonus of $600,000.
Trump himself could receive an additional 36 million shares in the coming weeks if the stock price stays above $17.50 on "20 out of 30 trading days," according to a company "earnout" clause.
Lawsuits against the company: Costly and damaging to reputation
The company's filing Monday notes that five lawsuits have been filed in recent weeks involving Trump Media, Digital World, Trump Media co-founders Andy Litinsky and Wes Moss, and former Digital World boss Patrick Orlando, were involved.
Digital World dropped a lawsuit last week after its largest founding investor - Arc Global Investments II, which is managed by Orlando - voted in favor of the merger. The other cases, however, are ongoing and involve claims by Litinsky, Moss and Orlando that the company worked to improperly dilute their shares.
Trump Media said in a report filed Monday that an ongoing lawsuit filed jointly by Trump Media and Digital World against Orlando and Arc could prove "costly and time-consuming" and have a negative impact on Trump Media's reputation.
In the latest lawsuit, filed last week in a Florida district court, Trump Media claims that Moss and Litinsky mismanaged the company but that Truth Social has since become "one of the fastest-growing social media platforms in history." had become.
To the author
Drew Harwell
is a reporter at The Washington Post covering artificial intelligence and the algorithms that are changing our lives. He was a member of an international reporting team that won the George Polk Award in 2021.
We are currently testing machine translations. This article was automatically translated from English into German.
This article was first published in English on April 2, 2024 at the “Washingtonpost.com” - as part of a cooperation, it is now also available in translation to readers of the IPPEN.MEDIA portals.