Photo: Hannah Beier/Bloomberg/Getty Images
Last Friday, shortly after markets closed on Wall Street’s most volatile week in years, Trump Media & Technology Group quietly announced it had lost $16 million during the past three months. This mid-August announcement came as a surprise. There was no prior indication Trump Media would announce its results that day, nor was there any detail on when it planned to file its full quarterly earnings report as required by law. And even though it was clear that it had been a rough few months — there were allegations that the company’s auditor was a fraud, as was the former CEO — the fact that Trump Media was getting even further from making a profit (it lost a mere $12 million in the first quarter) as Election Day approached was surprising. “Releasing on Friday after the close with no pre-announcement, and no conference call, and no Q&A tells you everything you need to know,” said Brian Lukow, 64, a former Lehman Bros. trader and onetime pop-group manager who shorts the stock.
But Trump Media isn’t just the former president’s personal online media empire. The two-year-old company is a low-use Twitter copycat with aspirations of being a Netflix knockoff — but really it is just the world’s purest meme stock. During the past month, it has been on a tremendously weird run. The July 13 assassination attempt on Donald Trump, and his subsequent rise in national polls, made Trump Media seem like a great way to bet on a likely Trump victory in November. But a lot has changed since then. Trump is no longer favored in betting markets or most election models — Kamala Harris is. The company’s stock has fallen to its lowest price since April, erasing more than $2 billion from its market value.
On Monday, when trading resumed after the surprise announcement, shares cratered, then popped, and fell again. As much the stock has been responding to political forces, a new threat emerged on Monday in the form of the Trump Media’s largest shareholder— Donald Trump. Ahead of a livestream event on X, his company’s main competitor, Trump posted campaign messages on Elon Musk’s social network. Apparently he was back to posting on the app formerly known as Twitter — seemingly undermining the whole point of having a platform of his own. By early Tuesday, shares had fallen to their second-lowest showing since they started trading publicly. “The problem is serious market participants view Truth Social as a joke,” said Marc Cohodes, an investor known for making high-profile bets against companies, though he’s not shorting Trump Media. “No one takes the company seriously.”
Clearly, though, many people are. “I’ve been in it from day one. I support Trump 100 percent. I think he’s the right person for the job again, because too many politicians are crooked, and we need a businessman to run this country,” said Greg Bowden, an investor living in New Jersey. Bowden is a frequent poster on the DJT shareholder group on Truth Social, Trump Media’s answer to Reddit’s r/WallStreetBets. (Trump Media’s ticker on Nasdaq, where it trades, is DJT.) Bowden is, like a lot of meme-stock investors, a semi-professional. “I worked in finance before for myself, not anything pertaining to the SEC or anything,” he told me. He says he works as a house-flipper in central Jersey and, in his off hours, gambles on harness racing at a nearby racetrack. (“Not thoroughbreds,” he added.) The volatility of DJT — with court rulings, political developments, and, of course, an attempt on Trump’s life all having outsize impacts on the stock price — has taken a personal toll on Bowden as he has watched his investment swell and shrink, sometimes for seemingly no reason. “It’s disgusting. It takes the heart out of you because you’re trying to support a movement in the right direction,” he said.
Bowden has invested in other meme stocks before and claims to have made money trading companies like AMC Theaters. But he is among a rabid group of traders whose bets on Trump Media have helped push the company’s value, for a brief time, as high as $10 billion. Since Trump owns more than half of the company’s shares, his Trump Media holding now make up the largest share of his fortune — just as he has been facing sky-high legal bills, penalties, and an expensive third run at the presidency.
Right now, Trump’s gains are on paper, since he has agreed not to sell any shares before a September lockup date. And he has reason to hold onto them for a bit longer. Should Trump win the presidency, a provision in federal law could allow him to sell in exchange for government debt — and bypass potentially billions of dollars in capital-gains tax. It’s a provision that other former businessmen turned administration officials have taken advantage of, including Trump’s former secretary of State Rex Tillerson, who had previously run ExxonMobil. Concern that meme-stock traders could help enrich Trump with more than $1 billion in tax-free stock sales prompted Representative Eric Swalwell of California to write a bill capping those tax savings on $100 million in assets. “It was Trump’s Truth Social going public that made me really worry how he could financially benefit from something that is supposed to incentivize people to go into public service but not actually enrich you,” Swalwell said.
There’s no guarantee that, come January 2025, Trump Media will be worth anything — and that has become an increasingly popular view among investors. Shorting (that is, betting against) Trump Media has, in fact, become much easier recently, and the company shoulders much of the blame for that. Since going public through a SPAC merger in February, Trump Media has announced plans to sell millions more shares to investors, exactly the kind of money-raising strategy that other memestocks, like GameStop, have employed at the height of their popularity. For Trump Media, though, this has not only diluted the number of shares available — upending the balance of supply and demand — but made it more lucrative to bet against the company’s stock. When the supply of shares was tight, an investor would have had to spend more than six times the stock’s price just to short it, according to S3 Partners, a financial-data firm. (Shorting involves borrowing shares, for a fee, when the price is high, then selling them back when they’re cheaper — then pocketing the difference). These days, the cost is about 10 percent. That is still “extremely expensive,” said Ihor Dusaniwsky, a managing partner at S3. But since Trump Media has plans to sell millions of more shares, that can bring costs down further, making it even easier to short the stock.
Friday’s earnings gave a clear look at how unpredictable the company is and why Wall Street professionals would probably never touch it. Last quarter, Trump Media’s general and administrative costs nearly sextupled, to $13.4 million, primarily owing to “legal, license and registration, insurance, accounting, and finance fees” — that is, costs that are likely to recur. In June, the company paid $78,000 to host an event at Mar-a-Lago, which Trump owns. About $344 million in cash is sitting in the company’s accounts, but much of it comes from expensive debt. Despite having a new auditor to look over its finances, the numbers reported as the company’s latest earnings are labeled “unaudited.”
For those betting on Trump Media’s demise, the Friday announcement was easy to read as a sign that share prices were headed lower. Lukow, the Lehman Bros. trader, said he had already bought options on the stock that get more valuable as the share price falls, called puts, but might buy wildly speculative options that bet on a near-total collapse of the stock by the end of the week (“For shits and giggles,” he said).
“DJT, in all my years, is by far the most grotesquely overvalued,” said Lukow. who has been betting against the company since the spring. “They will always lose money,” Lukow said, singling out how Trump Media made a paltry $836,900 in revenue last quarter. “If the top line was bigger than your average Chipotle, maybe you could make a bullish case.” To true believers like Bowden, though, all those numbers miss the point. “If Trump wasn’t involved, then the stock would be worthless,” Bowden said. “People look to the earnings. Earnings don’t mean nothing on a meme stock.”
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