I’ve seen some turkeys before but this just about beats all. Trump Media is down 17.3% and the day isn’t even over yet! The stock is down 59% in the past three weeks!
Financial commentators have been scathing.
Some of you may know that I’ve been following this debacle and posting the latest news to SAV. If people are interested, I’ll try to do the same here.
Today’s news. Yet another 14% decline for Trump Media!
It’s now down 65.5% from it’s high of three weeks ago the day it went public.
It’s basically a race to the bottom at this point.
What’s the definition of a cult follower?
This article excerpt from the Washington Post makes clear that these guys are buying this turkey based on nothing but blind faith.
Some Trump supporters who invested in his social media company have seen their share values plunge -— and see it as a test of faith
Washington Post
Jerry Dean McLain first bet on former president Donald Trump’s Truth Social two years ago, buying into the Trump company’s planned merger partner, Digital World Acquisition, at $90 a share. Over time, as the price changed, he kept buying, amassing hundreds of shares for $25,000 — pretty much his “whole nest egg,” he said.
That nest egg has lost more than half its value in the past two weeks as Trump Media & Technology Group’s share price dropped from $66 after its public debut last month to $26 on Monday. But McLain, 71, who owns a tree-removal service outside Oklahoma City, said he’s not worried. If anything, he wants to buy more.
“I know good and well it’s in Trump’s hands, and he’s got plans,” he said. “I have no doubt it’s going to explode sometime.”
Many of Truth Social’s investors say they’re in it for the long haul. Todd Schlanger, an interior designer at a furniture store in West Palm Beach who said Trump had been one of his customers, said he’s invested about $20,000 in total and is buying new shares every week.
McLain, the tree service owner in Oklahoma, said he believes the stock could “go to $1,000 a share, easy,” once the media stops writing so negatively about it and the company works through its growing pains. The company’s leaders, he said, are being “too silent right now” amid questions about the falling share price, but he suspects it’s because they’re working on something amazing and new.
McLain is an amateur trader — he invested only once before and “lost [his] butt” — and said he hasn’t talked to his family about his investment, saying, “You know how that is.” But he believes the Trump Media deal is a sign he is “supposed to invest,” he said.
“This isn’t just another stock to me. … I feel like it was God Almighty that put it in my lap,” he said. “I’ve just got to hold on and let them do their job. If you go on emotion, you’ll get out of this thing the first time it goes down.”
I’ve not one red cent worth of pity for those looking to gain from the cesspool that is this investment.
After posting several articles from fiancial journalists onTrump Media stock, I finally wrote one myself.
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Investment in Trump Media based on the ‘Greater Fool’ economic theory
The one week sell-off saw the stock slump from a high of $66 to a low on Friday of $31. However, jounalists have poined out that Trump Media (DJT) stock is still seriously overvalued, even after the sharp sell-off.
This business genius went public with a company that 1. has a limited customer base 2. is making large losses 3. has very limited prospects for growth, and no known strategy to become profitable.
However Trump owns millions of shares that he got a a song, so even if he manages to sell them when the stock hits $10/share, he’d still be making bank.
And then there’s the fact that total revenue for the company is $4 million – approximately the same revenu as one single typical McDonalds franchise. Trump Media filings showed the company lost $58 million last year. So folks we are talking about not only a small company, but in fact a money-losing small company.
So… this bears repeating: nearly $60 million in losses on a mere $4 million in revenue. And yet the market value of the company is in the billions? What is going on here?
The only way I can explain all this is with the famous ‘Greater Fool’ Economic theory.
Investopedia:
What Is the Greater Fool Theory?
The greater fool theory argues that prices go up because people are able to sell overpriced securities to a “greater fool,” whether or not they are overvalued. That is, of course, until there are no greater fools left.
Investing, according to the greater fool theory, means ignoring the fundamentals (ie. valuations, earnings reports, and all the other data).
Ignoring the fundamentals is, of course, risky; and so people subscribing to the greater fool theory could be left holding the bag after a correction.
Understanding the Greater Fool Theory
If acting in accordance with the greater fool theory, an investor will purchase questionably priced securities without any regard for their quality. If the theory holds, the investor will still be able to quickly sell them off to another “greater fool,” who could also be hoping to flip them quickly.
Unfortunately, speculative bubbles burst eventually, leading to a rapid depreciation in share prices.
Wikipedia on the Greater Fool Theory
In finance, the greater fool theory suggests that one can sometimes make money through speculation on overvalued assets — items with a purchase price drastically exceeding the intrinsic value — if those assets can later be resold at an even higher price.
In this context, one “lesser fool” might pay for an overpriced asset, hoping that they can sell it to an even “greater fool” and make a profit. This only works as long as there are enough new “greater fools” willing to pay higher and higher prices for the asset.
Eventually, investors can no longer deny that the price is out of touch with reality, at which point a sell-off can cause the price to drop significantly until it is closer to its fair value, which in some cases could be zero.