TMTG, which owns Trump's Truth Social, needs to build a real business to deliver sustained stock-price gains, experts said.
Maddie McGarvey/Getty Images
Donald Trump's meme stock skyrocketed in March but has now crash-landed.
Experts say its explosive rise and dramatic fall show how powerful people can wield their influence to create vast amounts of stock-market wealth — but it doesn't last long without a real business behind it.
Trump Media & Technology Group owns Truth Social, the former president's social-media platform. The parent company recently went public via a SPAC merger, and its stock surged as high as $79 on March 26.
That price valued TMTG at about $11 billion — roughly 2,700 times the $4.1 million of revenue it posted last year, which fueled a $58 million net loss.
However, a disappointing performance update and plans to issue shares have pulled the stock down by about 70% from its peak to just below $23 at Tuesday's close. The company's market value is now about $3 billion.
Trump, who owns at least 58% of TMTG, saw the value of his stake balloon to over $6 billion then plummet below $2 billion in under a month.
The former president briefly joined the Bloomberg Billionaires Index, and even secured a spot among the top 300 wealthiest people in the world. He's since fallen off the rich list entirely since his net worth nosedived.
Michele Costola, a researcher at Ca' Foscari University of Venice who studies meme stocks, told Business Insider that TMTG shares may reflect Trump's popularity and his supporters' confidence in him — or might speak to the market's perception of his current political power.
"Undoubtedly, TMTG is intricately intertwined with the persona of Trump, suggesting that the driving force behind its price fluctuations could be seen as a reflection of public perception, contingent upon positive or negative news about him," he said.
Costola compared Trump's company to listed European soccer clubs whose stock prices rise and fall depending on whether they win or lose.
"We can draw a parallel with the TMTG stock, linking its market value to Trump's political performances and the outcomes of the trials he's involved in," he said.
Trump might be able to convince his base to invest in TMTG and make him rich, said Imran Yousaf, an assistant professor at China's Wenzhou-Kean University who researches meme stocks.
"Given Donald Trump's substantial fanbase, particularly during election cycles, he could wield significant influence over specific stocks, such as Truth Social stock," he said.
But he emphasized that's unlikely to last unless there's a compelling product or service, as a company's stock tends to reflect its fundamentals in the long term.
Indeed, Warren Buffett is known for saying the stock market is a voting machine in the short run, but a weighing machine in the long run.
Yousaf compared TMTG stock to cryptocurrencies where "hype and speculation often overshadow fundamentals in driving valuations."
People egging each other on and stoking fear of missing out using funny pictures and videos can spur buying frenzies like the GameStop craze in 2021.
But Yousaf said it's "challenging to gauge how much memes alone can boost its stock. The sharp rise in Truth Social price will definitely be a short-run phenomenon because it is not fully backed by fundamentals."
On Tuesday TMTG announced plans to launch a streaming platform offering news, religious and family-friendly programming that it claims has been canceled or suppressed by other outlets.
"There is a lot of great content that simply can't find an audience for unjust reasons, and we want to let these creators know they'll soon have a guaranteed platform where they won't be canceled," said CEO Devin Nunes in a press release.
