FX168 Financial News Agency (North America) News Trump Media and Technology Group (DJT, DJTWW) are losing money with minimal revenue, and its main product Truth Social is still just a minor player in the social media field.
However, Wall Street values former President Donald Trump's social media company at nearly $8 billion, a price that has tripled in just five weeks.
Since hitting a historic low on September 23, Trump Media's stock price has been soaring. Market veterans say the strong rebound of Trump Media is almost entirely driven by betting on Trump's return to the White House.
Trump Media is not a regular stock. It is essentially a meme stock, which means its trading is not based on fundamentals but on speculation and momentum related to the political fate of the Republican candidate. This stock essentially represents traders' views on the election outcome.
"I've never seen anything like this. The value of this company is almost entirely dependent on the election results," Gene Munster, Managing Partner and Co-Founder of risk investment firm Deepwater Asset Management, told CNN in a phone interview.
"Binary Outcome"
Munster states that there is "nothing" in the fundamentals of Trump Media to justify its nearly $8 billion market cap. The company's revenue for the second quarter was only $837,000, a figure that is typically very small for a company worth millions rather than billions.
The company's second-quarter revenue was only $837,000, a figure that is typically very small for a company worth millions rather than billions.
However, since September 23, the stock price of Trump Media has soared over 200%.
"It sounds crazy, but in my view, this move is rational because it's a binary outcome," Munster said. "It's simple: if Trump wins the election, its value will exceed the current $8 billion. If he loses, its value will plummet significantly."
Trump is the major shareholder of this company named after him. The 0.11475 billion shares he holds are now worth about $4.5 billion, higher than the $1.4 billion on September 23.
Trump has pledged not to sell his shares - and he has not disclosed any stock sales - a fact that has helped boost the stock price.
"Crazy" valuation
George Kailas, CEO of Prospero.ai, a research platform that helps retail traders access better market intelligence, told CNN that trading of Trump Media is like a classic meme stock.
"Social sentiment is high, reaching a frenzy, boosting the stock value, and then people continue to bet more," Kailas said.
However, Kailas points out that Trump Media's sharp rise means its current trading price is over 1,600 times its enterprise value (a measure of the company's total value including debts and cash). He called this valuation ratio "too crazy" and noted that otherPopular stocksThe trading price is only a small fraction of that ratio.
"We see people betting with their hearts," Kailas said. "They don't have a good story to prove that this valuation is reasonable."
Public opinion polls show that the US election is still very intense.
After President Joe Biden ended his re-election campaign, Trump Media's stock price plummeted in July. At the time, opinion polls showed Trump facing a tough battle in defeating Democratic Vice Presidential candidate Kamala Harris. But now, Trump and Harris are deadlocked in the latest national opinion polls.
"It is reasonable to say that if Trump wins the election, the company's prospects will greatly improve," said Steve Sosnick, Chief Strategist at Interactive Brokers.
Sosnick said if Trump returns to the White House, Truth Social could become an important platform for presidential communication.
"The market indicates that this will be the exclusive platform of the most influential person in the world -- and they will find ways to make money," Sosnick said.
There will be more turbulence in the future.
Trump Media's already volatile stock prices may experience more fluctuations in the coming days and weeks.
Sosnick predicts that Trump Media may continue to rise before the election, and then if he wins with the classic 'buy the rumor, sell the news' move, there may be a pullback.
Analysts say that Trump's failure could trigger a significant sell-off.
"It will be in free fall," Sosnick said. "If he loses, I doubt it's a $1 billion company."
Sosnick believes that if the election is not successful, Trump Media will give back most of the profits to Trump's support.
"If he is not elected, what do you have left? A company that has been around for a few years, with low income, basically no profit," he said. "If this company was called Joe's Media Company, we wouldn't even be discussing it, and its value would be far below this number. Its value is entirely related to the former president."
