Trump Media is an odd beast, being neither a value nor a growth stock. With almost no revenue and debts that exceed its assets, its liquidation would leave investors with nothing. Yet its growth prospects look little better.CHRIS DELMAS/AFP/Getty Images
John Rapley is an author and academic who divides his time among London, Johannesburg and Ottawa. His books include Why Empires Fall (Yale University Press, 2023) and Twilight of the Money Gods (Simon and Schuster, 2017).
Of all the means available for pundits to try to predict the U.S. election – polling trends, rally sizes, betting markets, forecast models – one of the most intriguing may lie in a quirky corner of the market: the share price of Trump Media, the company behind Truth Social. If it’s anything to go by, it may suggest that Donald Trump’s political future is growing doubtful.
Stock market analysts distinguish between two types of shares: growth and value. Value stocks are held in old-fashioned companies with assets, income, profits and dividends, such as retail chains or utilities. What you’re buying is a stake in something underpinned by real value. In theory, the company could liquidate its assets and distribute the proceeds to its investors, but in the meantime, it gives them a share of its profits.
Growth stocks, on the other hand, are not backed up by assets or revenues sufficient to cover the value of outstanding shares, but which analysts believe have positive growth prospects. Amazon spent years losing money, but investors kept pouring in cash believing – rightly – that it would eventually become so lucrative they’d make back their losses.
Seen from the point of view of these two metrics, Trump Media DJT-Q is an odd beast, being neither a value nor a growth stock. With almost no revenue and debts that exceed its assets, its liquidation would leave investors with nothing. Yet its growth prospects look little better. With the social-media landscape already crowded, it’s difficult to foresee much upside for the company. Truth Social has less than a million monthly users whereas X, with more than 360 million monthly users, is losing money.
But when Trump Media went public earlier this year, its share price shot out of the gate, rising to more than US$60 and at one point making the company worth more than US$10-billion. On paper, Donald Trump, the principal owner of the company’s shares, just got a lot richer. Although he wasn’t allowed to sell any of his shares for six months, that cash was going to come in handy in an election year, while helping cover his accumulating legal expenses.
It appears that despite his company offering them neither value nor growth prospects, investors were willing to buy on the prospect a Trump victory in the November election would somehow enable him to make it a profitable vehicle. That made a sort of sense.
American presidents can monetize their political careers but as a rule, they do it in their postpresidency – Bill Clinton made himself a comfortable retirement by cashing in the favours he accumulated in office. What makes Mr. Trump unusual, though, is that he was already a wealthy businessman when he became president, and thus his political position boosted his companies’ values while in office.
Visiting dignitaries to the U.S. had an interest in using his hotels, and the value of a Mar-a-Lago membership rose from US$100,000 before he became president to US$1-million today on the prospect of getting a table near the world’s most powerful man. Just how a future president Trump would make Trump Media into a money-spinner wasn’t clear, but it was a reasonable bet he’d find a way.
So the recent performance of his company’s share price may be a worrying omen for him. After that initial spring surge, Trump Media’s share price bumped around in a range between US$25 and US$50, and was up around US$40 on the eve of Joe Biden’s withdrawal from the election. Since then, its value has trended relentlessly downward, closely tracking Kamala Harris’s steady rise in the polls. This week, it opened trading at less than US$14.
It may just be that investors, sensing a change in the wind, are starting to bail on Mr. Trump. If Mr. Trump can reverse Ms. Harris’s momentum, he could turn that around. But should this rate of decline continue, the company could be worthless come the November election. If investors conclude that Mr. Trump is going down to defeat and no longer want a share in his corporate future, that may tell us a lot about the prospects of his other businesses, too. His hotel bookings may drop off, and Mar-a-Lago memberships may sell at a discount.
It was considered a win for Mr. Trump that his lawyers managed to delay most of his trials until after the election, boosting his re-election prospects. But if he ends up nonetheless losing the election, those victories could prove Pyrrhic. If Mr. Trump’s business revenues dry up just as his legal expenses rise – and he won’t be in a position to tap into political donors any more – his future could darken. One could imagine him having to liquidate assets just as their market value is falling.
So let’s keep an eye on Trump Media’s share price to judge what investors make of his stock.