More than two years after announcing a merger to go public, Trump Media, the parent company of Donald Trump's social media platform Truth Social, went public on the stock market Tuesday under the ticker DJT.
Investors went wild.
Trump supporters and individual investors looking to make a quick buck from the soaring stock prices pushed up the stock price. At one point in the first day, Trump Media's price rose nearly 60%, see-sawing enough to cause the Nasdaq stock exchange to briefly halt trading.
Meme stocks also attracted attention as a way to compete with hedge funds that were short selling and betting on companies like GameStop. Other investors were simply in it to make money. But whatever the incentive to buy, experts warn of the risks associated with these volatile bets.
Now, like these “meme” stocks, experts say they expect Trump Media to have a bumpy ride.
“If you're an investor looking for a steady return, I wouldn't go into this with a 10-foot pole,” said Derek Horsmeyer, a finance professor at George Mason University in Virginia who specializes in corporate finance. Stated.
for money
Mitchell Standley bought his first stake in Digital World Acquisition, a public shell company that merged with Trump Media and went public, in early 2022.
Standley, 39, of Chandler, Arizona, has been active on the Wall Street Bets subreddit for several months and believes there is an opportunity to profit from stocks given the former president's fan base. Ta.
“I had seen how relentless his followers were, so I thought I'd give it a try. And I ended up making a lot of money,” he said.
He timed his bet correctly. With a $750 investment, he earned about $4,500 before withdrawing after just four hours.
When Digital World's stock price began to rise ahead of its merger with Trump Media, Standley decided to try his luck in stocks again.
He used a more sophisticated investment tactic, buying two “call options” from the company last week. One was $100 and the other was just over $160. He said he was able to sell both easily because the shares were in high demand, making a profit of more than $3,000. (A call option gives an investor the right, but not the obligation, to buy a stock at a specific price.)
DJT had a good opening day.The truth about Trump Social media stocks soar
Mr. Standley, a registered independent, said he saw no political motive in Mr. Trump's investment in the social media company.
“I play the market for money, not for politics. But I certainly pay attention to politics, because I know how loyal his followers are.” he said. “So when you see something like this, you think it's a no-brainer.”
Online forums on sites like Reddit are filled with people like Standley who have no plans to hold off on investing in Truth Social.
“We have learned from the meme stock craze that every time a bubble occurs, it tends to attract many other more rational investors looking to realize big profits, even if they have no serious interest in the company. We know it's going to be long-term,” said Albert Choi, a law professor at the University of Michigan.
Invest to support Trump
Other investors in Trump Media, like Terri Lynn Roberson, were also completely unconcerned about the potential returns.
Roberson, 52, of Texas' Dallas-Fort Worth metropolitan area, said he bought five shares of Trump Media stock at about $72 each at the stock's peak on Monday.
But she called the investment “all fun and games.” For her, it's more about sending a message than anything else.
“It's mostly to support Trump and his legal battles. Or sometimes to make a statement,” she said. “It’s to show people that they support him.”
Roberson said the only time she ventured into investing so far was during the early days of the coronavirus pandemic, when the cruise industry was at a standstill. She bought shares in Royal Caribbean as a show of her support.
Roberson said he's not worried if Trump Media stock doesn't bring in profits. She plans to keep them at least until after the 2024 presidential election and “see where it goes from there.”
Thanks to those investments, Trump Media closed Tuesday with a market cap of nearly $8 billion.
“I don't think the company's fundamentals justify this valuation,” said Usha Rodriguez, a University of Georgia law professor who specializes in corporate finance and securities law. “There was definitely a lot of investors interested because we had the opportunity to invest in the Trump brand.”
The company suffered losses in the tens of millions of dollars and sales were sparse. And it has struggled to attract advertisers and users since its launch in 2021.
Will Truth Social be the next GameStop?
Predicting stock market movements is no easy task, but most experts agree that Trump media volatility will continue.
“It's going to be a GameStop-like situation: it goes up, then it goes down very quickly, and then it goes up again,” George Mason's Horstmeyer said.
That's because the stock's performance so far hasn't been based on traditional metrics, and investors are “just riding the wave of sentiment,” he said.
This kind of volatility could pay off for investors like Mr. Standley and even Mr. Trump himself, who saw his net worth soar in the aftermath of Trump Media's launch.The former president's assets were listed on paper as being worth about $4.5 billion as of Tuesday afternoon., This is because he owns about 60% of the company's shares.
For others it can lead to losses. The stock has already experienced one big drop, falling from about $72 to less than $58 in the hour toward the end Tuesday.
Investors “risk losing money” every time they put money into a stock that's rising because of the actions of other investors rather than the performance of the company, said Rodriguez of the University of Georgia.
