Former President Donald Trump in Waco, Texas, March 25, 2023. (AP Photo/Evan Vucci)/Truth Social logo
As former President Donald Trump’s social media venture, Truth Social made its debut on the stock market, a wave of investors positioned themselves to profit from its potential downfall. Despite an initial surge in share price, subsequent volatility has only increased the short sellers betting against the company. In the meantime, he still has several legal battles ahead.
Here are five things to know.
The parent company of Truth Social, Trump Media & Technology Group (DJT), faced a significant decline in share value, dropping below $50 per share from its peak near $80. This decline erased over $2 billion in market value, Futurism reported.
Additionally, recent reports revealed that Truth Social generated only $4.1 million in revenue throughout 2023, despite incurring losses exceeding $58 million during the same period.
Trump Media emerged as one of the most targeted companies for short sellers, with many betting on its stock price to plummet. Short sellers borrow shares of a company and sell them, anticipating a decline in price, The New York Times reported.
Shorting Trump Media has proven to be a challenging endeavor due to limited availability of shares for borrowing. With only around five million shares available for short-selling out of approximately 137 million, the demand has driven up borrowing fees to exorbitant levels, making it difficult for short sellers to turn a profit unless the stock experiences a substantial decline, PBS reported.
Trump himself owns a majority stake (around 60 percent) in Trump Media, and company insiders also hold significant portions of the stock, The New York Times reported. Such shareholders typically refrain from lending their shares to short sellers, further limiting the supply available for shorting.
Despite its high valuation, Truth Social faces numerous challenges, including limited revenue, substantial losses, and uncertainties regarding user growth. Concerns about the company’s financial viability have fueled skepticism among investors, contributing to heightened market volatility.
In early 2021, following his ban from Twitter following the events of the January 6th attack on the U.S. Capitol, he and others came up with the idea for Truth Social. By 2022, this effort materialized with the launch of Truth Social, serving as Trump’s primary platform for communicating with supporters and criticizing adversaries.
On March 24, Trump filed a lawsuit against two co-founders of Trump Media & Technology Group Corp., asserting that they improperly organized the company and are undeserving of any stock therein. The two co-founders, Andy Litinsky and Wes Moss, were also contestants on Trump’s reality show “The Apprentice.”
In the ongoing legal dispute over the allocation of shares in this volatile meme stock, Trump alleges that Litinsky and Moss breached an agreement regarding the company’s structure, contending that they should not receive their 8.6 percent stake, currently estimated at $606 million, Bloomberg reported.
This lawsuit was filed in a Florida state court and follows a countersuit by Litinsky and Moss against the former president in Delaware Chancery Court concerning their entitlement to shares in the social media enterprise.
Former President Donald Trump in Waco, Texas, March 25, 2023. (AP Photo/Evan Vucci)/Truth Social logo
