The launch of Truth Social by Trump Media & Technology Group (DJT) has been met with both excitement and skepticism. After a blockbuster debut last week, the parent company's stock saw a dramatic 22% drop in midday trading on Monday. The updated regulatory filing released early on Monday revealed that the company had incurred heavy losses and faced significant risks due to its ties with former President Donald Trump.
Despite attracting about 9 million users since its inception, Truth Social's success hinges largely on the reputation and popularity of Trump. The company acknowledged that it faces greater risks compared to typical social media platforms, especially in terms of advertising revenue and user engagement.
Trump Media heavily relies on advertising for a substantial majority of its revenue, with ad sales playing a critical role in its financial performance. The company's filing also disclosed that stakeholders are subject to a six-month lockup period before selling or transferring shares, with the exception being a potential board vote for special dispensation.
Former President Trump, who still holds a significant stake in Truth Social, faces pressure to address a $454 million fraud penalty and a campaign fundraising shortfall as he prepares for a potential 2024 election rematch against Biden. The decision to potentially sell some of his stake could offer financial relief, but it also carries the risk of legal challenges from shareholders.
Trump Media's public debut on the Nasdaq marked a significant milestone for the company founded in response to Trump's removal from major social media platforms following the Jan. 6 Capitol riots. Truth Social aims to provide a platform for “cancelled” content creators and facilitate honest global conversations without fear of censorship.
As the company navigates the challenges ahead, investors and industry experts will be closely monitoring its performance and the impact of Trump's involvement on its growth trajectory. Stay tuned for more updates on this evolving story.