“TRUTH SOCIAL is adored by Donald Trump,” as he expressed following intense exchanges in Trump Media, the entity responsible for Trump’s own social network. Given at a stage it was worth upwards of $10 billion (£7.4 billion) once it was floated on Tuesday, his enthusiasm isn’t surprising. However, the valuation does seem outrageous.
Despite its high valuation, Truth Social hasn’t garnered substantial popularity as a social network. In the first nine months of 2023, the profitless firm earned less than $3.5 million in revenue. Putting it against the exponentially more popular Reddit proves this point further. Reddit, which also has a comparable market capitalisation ($8.4 billion), made $804 million in last year’s revenue, after its recent IPO.
Professor Jay Ritter, a renowned IPO specialist also known as Mr IPO in Wall Street circles, joins a chorus of voices raising concerns about Truth Social’s valuation. According to him, the brand will most likely see a 95% drop in its stock value eventually.
Still, shares in meme firms like Trump Media can hold their value for a considerable span, as witnessed with GameStop and AMC. Whilst GameStop’s value plummeted by 85% from its peak during the 2021 meme stock frenzy, and AMC crashed from $231 to under $4, it took a substantial period for their respective bubbles to burst. Ultimately, the underlying basics will re-emerge. However, predicting when this will happen remains a challenge. For now, you might find placing a wager against Trump’s dedicated followers as perilous as aligning with them.