An Uncertain Future for Donald Trump’s Social Media Company: Trump Media Technology Group

When it comes to predicting the success of Donald Trump’s social media company, Trump Media Technology Group (TMAG), the concept of 'odds' is misleading. This undercapitalized venture, which has yet to showcase a tangible product, is more of a meme stock.

While it's possible that TMAG could hold up for a while or even see a short-term increase, it's wise not to underestimate the American public's capacity for critical thinking. At some point, between now and six months from now—when the lock-up period expires—the truth will become apparent, and the stock will likely fall sharply.

The Current Landscape of TMAG

Currently, the Special Purpose Acquisition Company (SPAC) that acquired Truth Social, the social media platform planned to be run under TMAG, is valued at just under $2 billion in DWAC shares. The new company, combining TMAG and the SPAC, will be worth nearly $6 billion, with Trump owning approximately 58% of the shares. However, this valuation is already proving unsustainable.

The Lock-Up Period and Potential Sell-offs

The real risk lies in the upcoming lock-up period expiration. By next October, just before the election, we must consider several scenarios. If Trump feels he's likely to lose, he might strategically sell his shares early, despite the six-month lock-up. Even if he believes in a victory, he may choose to cash out a significant portion of his holdings.

Moreover, the lock-up period is not only for Trump. Other major shareholders, many of whom are family members and cronies of Trump, could potentially sell their shares early, leading to significant volatility in the stock's price. Lawsuits from losing shareholders might be a consideration, but financial prudence often outweighs legal proceedings.

The Financial Reality Behind TMAG

TMAG has not yet demonstrated profitability. In the first nine months of 2023, the company reported a loss of $49 million on revenue of just $3.3 million. Annualizing these figures, we get an estimated revenue of $5 million and losses of $60 million, resulting in a price-to-revenue ratio of 1000 to 1. This is an exaggerated valuation in any industry, let alone for a social media platform that's still developing.

For comparison, another social media company that has been facing similar challenges is Reddit. Despite losing money, Reddit's market capitalization is about $9 million, with revenue exceeding $800 million. This translates to a price-to-revenue ratio of only 11 to 1.

Conclusion: Risk and Long-Term Prediction

Given the current financial situation and the lack of a proven business model, it's challenging to predict the success of TMAG. Short-term fluctuations are likely, but long-term sustainability is questionable. Investors should be prepared for a potential downward turn in the stock price and consider the broader market dynamics, including the upcoming election.

Ultimately, TMAG faces significant challenges in scaling its operations and generating sufficient revenue to support its current valuation. The community of loyal supporters who have invested in the stock based on their faith in Trump and MAGA must be prepared for the possibility that these beliefs might not equate to financial rewards in the near future.