The recent downturn in shares of Trump Media & Technology Group (TMTG), the parent company of Truth Social, highlights a significant intersection between politics, media, and finance. While the immediate trigger for the stock’s fall was Donald J. Trump’s debate performance, the deeper story reveals much about the volatility surrounding both Trump’s political aspirations and his business ventures. In this article, we’ll delve beyond the headlines, exploring the backstory of Trump Media’s formation, its current challenges, and the potential long-term implications for Trump and his supporters.
The Origins of Trump Media & Technology Group
Trump Media & Technology Group was created in response to Donald Trump’s expulsion from mainstream social media platforms following the January 6, 2021, Capitol riots. After being banned from Twitter, Facebook, and other platforms, Trump vowed to create his own social media company that would promote free speech and serve as an alternative to what he and many of his supporters saw as the censorship of conservative voices. In October 2021, the world was introduced to Truth Social, a platform designed to serve as a haven for Trump’s followers and others who felt disenfranchised by traditional social media giants.
The vehicle for Trump Media’s entry into public markets was a special purpose acquisition company (SPAC) called Digital World Acquisition Corp (DWAC). SPACs, often referred to as “blank check companies,” are shell corporations listed on a stock exchange with the purpose of merging with a private company, thereby taking it public without the need for a traditional initial public offering (IPO). In this case, DWAC merged with TMTG, allowing Trump Media to go public in March 2022.
However, TMTG’s journey on Wall Street has been rocky from the start. From regulatory scrutiny over the merger process to underperformance in the stock market, the company has faced numerous challenges. Its stock initially soared after the announcement of the merger but has since lost over 70% of its value, reflecting not only the company’s financial difficulties but also the fluctuating fortunes of Donald Trump’s political career.
Political and Business Crossroads
While TMTG was founded as a business venture, its fortunes have been closely tied to Donald Trump’s political standing. Investors in TMTG have long viewed the stock as a proxy for Trump’s political success or failure. When Trump is perceived as a dominant force in the political arena, the stock tends to rise. When his prospects dim, as they did after the recent debate with Vice President Kamala Harris, the stock declines.
The sell-off in TMTG shares following the debate suggests that investors viewed Trump’s performance as a setback. Commentators, including members of Trump’s own Republican Party, noted that Harris was able to put Trump on the defensive, steering him off message and weakening his position. This reaction had direct financial consequences, with premarket trading indicating a potential 10% drop in TMTG shares.
This is not the first time Trump’s business interests have been affected by his political standing. Throughout his presidency, Trump’s hotels, golf courses, and other business ventures saw fluctuating revenues based on public perception of his performance in office. However, the direct linkage between a social media company and Trump’s political career is a new dynamic that adds another layer of complexity to both his business and political strategies.
The Looming Decision on Stock Sales
One of the most pressing issues for Trump in the coming weeks is whether to sell some of his shares in TMTG. As the largest shareholder, Trump owns about 57% of the company, a stake that was worth approximately $2 billion at the market close on Tuesday, but has since been reduced due to the falling share price.
On September 19, a lock-up provision that prevents Trump and other large shareholders from selling stock will expire. This provision, common in SPAC deals, was designed to prevent early investors from flooding the market with shares immediately after the company went public. Once the provision expires, Trump will have the option to sell some of his stake.
The question of whether Trump should sell is complicated. On one hand, selling now would allow him to cash in on some of his shares before the stock potentially falls further. Given the company’s poor financial performance and the regulatory challenges it faces, there is a risk that the stock could continue to decline in value, making it a prudent time for Trump to lock in some gains.
On the other hand, selling a large portion of his shares could be seen as a lack of confidence in the company’s future. For a businessman who has built much of his brand on success and winning, such a move could send the wrong message to both his political supporters and the market. Furthermore, flooding the market with shares could drive the stock price even lower, eroding the value of his remaining stake.
There is also the question of how Trump’s supporters, many of whom are also TMTG shareholders, would react to a large stock sale. These supporters have invested not only financially but emotionally in Trump’s media company, viewing it as a way to fight back against what they see as censorship by traditional social media platforms. If Trump were to sell a significant portion of his shares, some of these supporters might feel betrayed, potentially weakening his political base.
The Broader Implications for Trump and His Future
The situation with TMTG has broader implications for Trump’s future, both in business and politics. The company’s falling stock price is a reflection not only of Trump’s debate performance but also of the larger challenges facing Truth Social. The platform has struggled to gain traction in a crowded social media landscape, where it competes with established players like Twitter (now X), Facebook, and newer alternatives like Threads.
Financially, TMTG is losing money, and the outlook for the company remains uncertain. If the stock continues to decline, Trump’s personal wealth could take a significant hit, which could affect his ability to fund future political campaigns. While Trump has historically been able to raise money from donors, his personal wealth has been an important asset in his political career, allowing him to finance his 2016 campaign when traditional Republican donors were hesitant to back him.
Moreover, the regulatory challenges facing TMTG cannot be ignored. The merger with DWAC has attracted scrutiny from the Securities and Exchange Commission (SEC) over potential violations of securities laws. If the SEC were to take action against TMTG or DWAC, it could further damage the company’s financial prospects and Trump’s reputation as a businessman.
Politically, the decline in TMTG’s fortunes raises questions about Trump’s ability to maintain his influence over the Republican Party. While Trump remains a dominant figure in the party, the stock market’s reaction to his debate performance suggests that his grip on the party may be weakening. If Trump is seen as vulnerable, it could embolden potential challengers within the Republican Party, further complicating his path to the presidency in 2024.
Conclusion: A Pivotal Moment for Trump Media and Donald Trump
The recent sell-off in TMTG shares following Donald Trump’s debate with Kamala Harris represents more than just a reaction to a single political event. It reflects the deep entanglement of Trump’s political and business fortunes, and the challenges he faces in both arenas. With the lock-up provision set to expire in just over a week, Trump must decide whether to cash in on his stake in TMTG or hold out in the hopes of a political resurgence.
The coming weeks will be critical for Trump, as the decisions he makes will not only affect his financial future but also his political prospects. Whether Trump Media can survive in a competitive social media landscape, and whether Trump can maintain his influence over the Republican Party, remain open questions. What is clear, however, is that the stakes for both Trump and his media company have never been higher.