Here’s why Trump Media (DJT), Rumble, Reddit stocks dived

Trump Media & Technology (DJT), Rumble (RUM), and Reddit (RDDT) stock prices dived hard on Monday, erasing some of the recent gains. 

DJT, the newly-public social media company, crashed by over 14% on Monday and is now down by almost 20% from its highest point last week. 

Similarly, Rumble, the social media company popular with the right wing, also retreated by 13% while Reddit dropped by 6.5%.

RDDT vs RUM vs DJT stocks

The main reason why these stocks are falling is that they are all significantly overvalued. DJT has a market cap of over $7 billion even though it has minimal sales and huge losses. Its growth has stalled and the company is expected to struggle in the future.

The biggest concern for Trump Media is that most mainstream companies like Apple, Microsoft, Kimberly-Clark, and Colgate-Palmolive will be unlikely to advertise on the platform. In most cases, these companies prefer mainstream social media platforms like YouTube and Facebook.

There are also valuation concerns for companies like Rumble and Reddit. Rumble, a more popular video and software platform, has a market cap of over $2.2 billion. This is even though the company’s total revenue came in at $81 million in 2023. Its loss jumped to over $116 million. 

Reddit’s valuation is also wanting. It has a market cap of over $8 billion. It had over $800 million in revenues and lost more than $90 million. 

This sell-off is also happening after Fidelity slashed its valuation of X, formerly known as Twitter. It slashed its valuation by about 7.3%. This means that X has a valuation of less than $20 billion, down from the $44 billion that Musk paid for.

Reddit and DJT stock prices have also tumbled as I predicted here and here. Historically, stocks tend to rise after going public and then decline sharply thereafter as the hype retreats and as earlier backers take profits.