Truth Social stock made Mr Trump one of the world's 500 richest people, but is unlikely to help the former president solve his fine crisis.
Mr Trump's net worth has increased by nearly $4.4 billion, to about $7.5 billion, since Trump Media, the parent company of the social network Truth Social, went public earlier this week.
Trump Media’s stock price has risen 56%, reaching a peak of $78 on March 26. Despite the late-session decline, Wall Street now values Trump Media at about $11 billion.
That valuation is higher than the $6.4 billion valuation of Reddit, a nearly 20-year-old media company that generates about 160 times more annual revenue than Trump Media. Reddit brought in $804 million last year, while Trump Media brought in about $5 million, making Truth Social a cash cow for the former president.
The news comes as Mr Trump faces a cash crunch over a series of legal troubles. The former US president is set to post $175 million bail for an unprecedented fine in a New York case.
New York Judge Arthur Engoron ordered former President Trump to pay $355 million in fines in February for allegedly inflating the value of his assets to get favorable loans or insurance terms in the state. With interest, Mr. Trump must pay a total of $464 million in fines.
In addition to the above amount, Mr. Trump also had to post a $91 million bail in his previous defamation lawsuit against writer E. Jean Carroll.
Mr. Donald Trump in West Palm Beach, Florida on March 24. Photo: Reuters
The former US president also faces four prosecutions with a total of 91 charges, such as paying hush money to porn stars, conspiring to overturn the election results leading to the riots at Capitol Hill in 2021, interfering in the Georgia state election and illegally retaining classified documents after leaving the White House.
The Trump campaign and its Save America political action committee have posted dismal fundraising numbers in recent months. President Joe Biden’s campaign raised more than $53 million in February, while Trump and his joint fundraising committee raised $20.3 million that month.
“We will never be able to raise money with Biden’s money,” a Trump campaign adviser admitted on March 28.
Truth Social’s successful IPO has raised hopes that it could help Trump address his current financial troubles. Some have speculated that Trump could consider selling new shares to raise enough cash to pay bail and appeal, which would save him from having to sell his properties at rock-bottom prices.
However, many experts say that Truth Social and Trump Media are unlikely to do so. John Rekenthaler, an expert at financial analysis firm Morningstar in Chicago, said Trump Media's stock is unlike other stocks because its value is separate from its business results.
“Like bitcoin, people don’t buy Trump Media stock for future cash flows. They buy it for the expectation of its price going up, as well as the connection through that asset,” Rekenthaler said, adding that for shareholders, it’s a way to demonstrate their faith and commitment to the former president.
After going public, major shareholders of Trump Media, including Mr. Trump, will not be able to sell their shares for six months. This rule is designed to help companies maintain their positions after going public. If Mr. Trump tries to circumvent the rule, other shareholders could sue, arguing that his efforts to sell off shares caused the price to fall and they suffered losses.
Mr. Trump may not be able to wait six months, as the bail deadline approaches. Many experts also do not rule out the possibility that Trump Media's stock price will fall further in the next six months.
Tom Hulick, managing director of consulting firm Strategy Asset Managers, said Trump Media's stock is unlikely to be a "high-quality stock" that will maintain its current value over the long term.
And even if Trump decides to break the rules and sell off his shares to raise cash quickly, he’ll have to find willing buyers. His sell-off could also depress the value of the shares.
Truth Social also faces the risk of being overshadowed by its competitors. Trump’s social network had just 494,000 users on iOS and Android in February, according to Similarweb. That’s a far cry from the 75 million on X and 142 million on Facebook. Even Threads has 10 times the number of monthly active users as Truth Social.
Truth Social launched in October 2021, but has been steadily shrinking. Monthly active users in February were down 51% year-over-year, according to Similarweb.
Like any social media company, Truth Social faces pressure to grow its user base, expand its advertising business and build a paid subscription service. Those tasks are seen as particularly complex for Trump’s social network, as American politics become more polarized and many people turn against the former president.
Matthew Kennedy, senior strategist at investment bank Renaissance Capital, said Trump Media's listing on the stock exchange was equivalent to a "billion-dollar bet" on Mr. Trump's second term in the White House.
“If he wins the November election, Truth Social will probably be the president’s primary means of communication. They’re betting on this,” Kennedy said.
But Vox analyst Nicole Narea said it was a long-term gamble. In the short term, Truth Social is unlikely to help Mr. Trump overcome the financial difficulties he is facing from the huge fines.
Thanh Tam (According to Vox, CNN, Reuters )
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