Why did Trump’s DJT stock crash 21% after going public?

Shares of Donald Trump’s social media venture, Trump Media & Technology Group (DJT.O), experienced a sharp decline of 21% on Monday, erasing the gains made during its recent public debut.

This tumble followed revelations of significant losses and financial uncertainties disclosed by the company.

Trump Media posts major loss

In a filing, Trump Media & Technology Group (TMTG) revealed a staggering loss of over $58 million in the year 2023, triggering a sell-off among investors.

This downturn came less than a week after the company went public through a high-profile blank-check merger, leaving shareholders reeling from the sudden downturn.

The initial surge in DJT’s stock, which closed at nearly $58 per share on March 26th, was fueled by enthusiastic retail buyers, including supporters of Donald Trump, who is widely anticipated to be the Republican nominee in the upcoming 2024 presidential election.

However, Monday’s disclosure of financial setbacks swiftly reversed this trend, causing shares to plummet by $13.30 to $48.66.

What would the implication be for Trump?

Despite the stock’s decline, Trump retains ownership of 78.75 million shares, potentially resulting in a significant windfall.

At the peak of the stock’s value last week, Trump’s stake would have exceeded $6 billion. However, following the recent sell-off, its value has dwindled to approximately $3.8 billion.

It’s worth noting that Trump is legally restricted from selling or borrowing against any of his shares for the next six months.

Furthermore, Trump Media & Technology Group (DJT.O) still maintains a market value surpassing $6 billion, although this represents a considerable drop compared to its valuation during its initial public offering.

What short seller got to do with it?

Short sellers targeting both Trump Media and its predecessor Digital World Acquisition saw a significant recovery on Monday, yielding a $65 million gain on paper.

This development highlights the high demand for shorting DJT shares, despite the scarcity of borrow supply.

Trump Media’s financial performance

Trump Media’s financial struggles extend beyond its stock performance. The company reported revenue of just $4.13 million in 2023, up from $1.47 million the previous year.

In contrast, competitor Reddit brought in $800 million in revenue during the same period. Moreover, Truth Social’s user base remains significantly smaller, with approximately 5 million active monthly users, compared to Reddit’s 73 million.

Despite the challenges, Trump Media continues to face legal battles with co-founders Wesley Moss and Andrew Litinsky. These legal disputes further compound the company’s woes, underscoring the uncertainties surrounding its prospects.