Trump's Truth Social stock is soaring as the company loses money. Here's why.
The stock climbed 16% during its first day of public trading.
Shares of former President Donald Trump’s social media platform Truth Social have soared in its first couple days of public trading.
Trump Media & Technology Group, the parent company of Truth Social, climbed 16% on Tuesday, its first day on the market. By afternoon trading on Wednesday, the stock had jumped another 14%.
The rally grants Truth Social a valuation of more than $8 billion, even though the company has yet to turn a profit and generates quarterly revenue of barely $1 million.
The stock performance also holds significant financial implications for Trump, whose 60% stake in the company could ultimately deliver a multi-billion dollar windfall.
Experts who spoke to ABC News said the stock boom stands divorced from the financial condition of the company, instead reflecting a buying spree among Trump supporters as well as opportunistic traders capitalizing on the momentum.
"This is people voicing their political opinions through the markets," Tom Essaye, president of financial data firm Sevens Report Research, told ABC News. "There’s nothing going on here that has anything to do with the financial fundamentals."
A representative for Truth Social did not immediately respond to ABC News' request for comment. "Truth Social is doing very well. It's hot as a pistol and doing great," Trump told reporters in New York on Monday.
Analysts drew parallels to the emergence in recent years of so-called meme stocks such as GameStop and AMC.
In 2021, the price of GameStop climbed nearly 700%, driven in part by traders discussing the company on a Reddit chatroom called Wall Street Bets. The rally did not coincide with a major strategy shift or executive shakeup for the ailing chain of video game stores.
The success of Truth Social similarly reflects an upswell of sentiment rather than a demonstration of company performance, Kristi Marvin, chief executive of SPACInsider.com, told ABC News.
"This has all the DNA of a meme stock," Marvin added.
Truth Social, listed as DJT, remains far smaller and less financially robust than its rivals in the crowded social media sector.
Research firm SimilarWeb estimates the company drew 5 million website visitors in February, which puts it well below the roughly 2 billion monthly active users reported by Instagram. TikTok boasts at least 1 billion monthly active users, the company said in 2021.
Truth Social generated roughly $3 million over the first 9 months of 2023, government filings show. Meanwhile, the company reported $49 million in net losses over that period. By comparison, Instagram-parent Meta delivered nearly $135 billion in revenue last year, company earnings showed.
"This is a tough business to become profitable in," Marvin said.
The stock rally arrives as Trump weathers financial challenges. A New York appeals court said on Monday that Trump must secure a $175 million bond, albeit a smaller figure than the $454 million he was asked to provide by a lower court.
Trump can’t sell or leverage his stake in Truth Social for at least six months due to a lockup provision intended to prevent a rapid selloff that could shake investor confidence, but the company has already bolstered Trump’s net worth.
On the heels of Friday’s merger vote, Trump joined the Bloomberg Billionaires Index for the first time with a reported net worth of $6.5 billion. On Wednesday, it ticked up to more than $7 billion.
Essaye, of Sevens Report Research, cautioned that the price of Truth Social would ultimately fall, when the company’s financial reality overtakes Trump supporters’ fervor.
"At some point, this will return back to earth. The financial reality always wins," Essaye said. "When? That is very hard to say."
However, the company still retains a possible avenue for financial success, he added.
Truth Social faces steep odds in the social media business, but the company may function as a vehicle for additional Trump-led media ventures.
"If you think about DJT as a way to buy equity in Donald Trump’s brand, then I would never say it can’t work out," Essaye added. "He’s very good at promoting his brand."
ABC News' Peter Charalambous contributed reporting.