Shares of former US president Donald Trump's social media company plunged on Monday, wiping out the gains from its debut last week.
The plunge came after Truth Social reported millions in losses and said it would struggle to meet its financial liabilities going forward.
Trump Media & Technology Group lost more than $58 million in 2023, it said in a filing, sending shares reeling less than a week after Truth Social's parent company went public through a high-profile blank-cheque merger.
The stock surged in its March 26 debut to close at nearly $58 a share on retail buyer enthusiasm, including supporters of Mr Trump, the Republican Party nominee in this year's US presidential elections. But Monday's disclosure reversed that trend, sending shares down $13.30, or 21.47 per cent, to $48.66.
“Truth Social was overvalued and that reality is dragging down the stock. Because the service does not have a clear path to profitability and its revenue are meagre, its high debut was unsustainable,” said Ross Benes, an analyst at Insider Intelligence.
Mr Trump owns 78.75 million shares, which could result in a windfall for the former president, depending on their value.
At the stock's peak last week, his stake would have been worth more than $6 billion, but after the sell-off it would be valued at about $3.8 billion. Mr Trump is not allowed to sell or borrow against any of his shares for six months – and any move he made to try to alter that agreement would probably trigger more selling.
Even with the stock's decline, it still has a market value of more than $6 billion, compared with social media platform Reddit's market capitalisation of $8 billion.
Truth Social “enjoyed a huge run-up on hype and enthusiasm, but it is a long way off from becoming a true scaled social media challenger to X, Instagram, TikTok and other platforms”, said Michael Ashley Schulman, of Running Point Capital.
Truth Social's revenue was $4.13 million last year, up from $1.47 million in 2022, it said. By comparison, Reddit brought in revenue of $800 million last year.
Reddit has 73 million active users while Truth Social's total number of sign-ups stands at 8.9 million.
