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Trump Media stock closes 21% lower after company reports $58 million loss for 2023

This photo illustration shows an image of former President Donald Trump reflected on a phone screen displaying the Truth Social app, in Washington, DC, February 21, 2022.

Stefani Reynolds | AFP | Getty Images

The share price of Trump Media closed 21.47% lower on Monday, hours after the social media app company linked to former President Donald Trump reported a net loss of $58.2 million on revenue of just $4.1 million in 2023.

Trump Media and Technology Group shares plunged more than 25% around 1:08 p.m. ET before recovering slightly later in the day.

Trump Media’s closing price was $48.66 per share, more than $30 below its high of $79.38 per share, reached last week just after its IPO.

Despite Monday’s sharp drop, the company’s market capitalization still stood at nearly $6.6 billion.

But as of Monday’s closing price, Trump’s shares in Trump Media were worth about $3.8 billion, about $2.5 billion less than last week.

Earlier Monday, Trump Media, in its 8-K filing with the Securities and Exchange Commission since going public through a merger with a shell company, disclosed last year’s loss.

Much of the net loss appears to come from $39.4 million in interest expenses, according to the filing.

A spokesperson for the company — which owns the Truth Social app commonly used by the former president — when asked about the findings, referred CNBC to a press release issued Monday evening by the company.

In the statement, Devin Nunes, CEO of Trump Media, said: “We are excited to operate as a public company and have secure access to the capital markets. »

“Closing the 2023 financial statements related to the merger, Truth Social today has no debt and more than $200 million in the bank, which opens many opportunities to expand and improve our platform” , Nunes said.

“We intend to take full advantage of these opportunities to make Truth Social the premier free speech platform for the American people.”

The SEC filing shows that in 2022, Trump Media had net income of $50.5 million and total revenue of just $1.47 million.

The profit was largely due to $75.8 million coming from a “change in fair value of derivative liabilities.” This refers to how Trump Media’s convertible promissory notes were valued, the report said.

The losses Trump Media saw last year could continue for some time, according to the company.

“TMTG expects to incur operating losses for the foreseeable future,” said the filing, which came a week after the company began trading under the symbol DJT on Nasdaq.

The filing also warns shareholders that Trump’s involvement in the company could put it at greater risk than other social media companies.

TMTG also disclosed to regulators that the company had identified “material weaknesses in its internal control over financial reporting” when preparing its previous financial statements for the first three quarters of 2023.

On Monday, Trump Media said these “identified material weaknesses continue to exist.”

More Donald Trump news

Trump owns 57.3% of Trump Media’s stock, a stake valued at $3.83 billion.

Forbes reported last week that Trump’s existing stock accounts for well over half of his total net worth.

He is also expected to receive an additional 36 million shares over the next three years, provided Trump Media shares reach a set of benchmark prices during that time. These targets are all well below the company’s stock price as of Monday morning.

Trump Media’s stock price soared when its shares began trading Tuesday, several days after the company merged with a special purpose acquisition company, Digital World Acquisition Corp., which had been traded under the symbol DWAC. The newly merged company now operates under Trump’s initials, DJT.

Analysts note that the company’s high valuation is partly due to stock purchases by Trump’s political supporters, who are enthusiastic about owning part of a company so closely associated with the presumptive Republican nominee. the Presidency.

This enthusiasm, however, creates unique risks for the company. The new 8-K filing says Trump Media “may be subject to greater risks than traditional social media platforms due to the concentration of its offerings and the involvement of President Trump.”

In a subsequent 10-K filing with the SEC on Monday, Trump Media listed several risks related to its most famous shareholder.

“TMTG’s success depends in part on the popularity of its brand and the reputation and popularity of President Trump,” the 10-K filing states. “Adverse reactions to publicity relating to President Trump, or the loss of his services, could have a negative impact on TMTG’s revenues and results of operations.”

This filing also stated: “President Trump is the subject of numerous legal proceedings. An unfavorable outcome in one or more of the pending legal proceedings could have a negative impact on TMTG. »

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