Trump Media shares collapse, but remain wildly overvalued

Truth Social is still being valued at $4.5bn or more than 1,000 times sales

The air is coming out of Trump Media’s inflated valuation, with shares in Donald Trump’s company more than halving since going public in late March. More bloodletting is required.

Truth Social is still being valued at $4.5bn, an absurd valuation for a money-losing company that generated just $4.1m in revenues last year.

This means the company trades on more than 1,000 times sales, compared to 5.2 for the tech-heavy Nasdaq index. As for other social media stocks, Reddit trades on 11 times sales; Facebook, 10; Snap, 4. Not that any of this really matters.

Trump Media is a meme stock, and most of the Redditors doing the buying and selling know well the valuation makes no sense, that this is a game. The fact that short sellers are finding it extremely difficult to short the stock is another barrier to sane valuation.

The recent share price collapse is a step towards sanity, but volatility will likely remain elevated during the 2024 presidential contest. With a meme stock like this, the only thing predictable is its unpredictability.

Read More

Recommended