The first acts of this year have the echo of 2021, like a song you know all too well. The rapid ascent of Bitcoin, the impending handover of power in the US from one old figure to another, Elon Musk's wacky declarations about taking "Dogecoin to the moon," and the reappearance of "meme stocks" all contribute to a scenario that seems familiar. One of the aforementioned old guns, Trump Media & Technology Group, is the majority owner of one such stock that is attracting a lot of attention.
Under the symbol "DJT," the business's share price skyrocketed after it merged with a 2021 similar entity, a special purpose acquisition company (SPAC), also referred to as a "blank cheque company." The company made its market debut in late March. Due to ongoing legal disputes and his need to pay large fines, Trump's net worth increased significantly in a single day, with the stock rising by more than 50%. But excitement quickly gave way to schadenfreude as the stock fell more than $1 billion in the following days due to disappointing financial reports. Trump's roughly 60% holding still has an on-paper valuation of around $4 billion, but he is unable to cash out his shares due to a six-month lock-up period.
Though there are disagreements on whether Trump's cunning planned these financial acrobatics, his talent for fortuitous events is undeniable. The scene infuriates traditionalists who hold fast to the idea that profitability and other fundamentals should determine stock prices. This attitude is best summed up by media magnate Barry Diller's broadcast tirade on CNBC, in which he called stock buyers "dopes" who were duped by Trump. In truth, the financial data presents a dismal image: In 2021, Trump Media & Technology Group not only lost a tonne of money but its meager $4.1 million in income was dwarfed by its startling $58 million in losses.
Only a small portion of the company's current valuation, or about $41 million, would be justified if it were trading at multiples close to those of industry titans like Meta. Yet, as of the time of writing, the company boasts a market capitalization of $5.7 billion, trading at an absurd 1,400 times its revenue.
But in this story, feelings take precedence over reality. The divisive nature of Trump's persona incites strong feelings that go beyond the logical analysis of market fundamentals. Terms such as "untethered from reality" are used to describe the stock market, but only if one believes in the outmoded theory of capitalism as an unbiased source of prosperity. This change in market dynamics is highlighted by the rise of cryptocurrencies, which are only motivated by feeling rather than material assets. While there may be some truth to the story that investors buy "DJT" in order to support Trump, for many people, financial gain takes precedence above ideological loyalty. According to Reuters interviews with "DJT" investors, the majority of them cited profit-seeking as their main motivation. Are they truly "dopes"? Perhaps not, especially those who capitalized on the initial surge. Their gamble on a Trump-branded stock paid off because others bought into the hype. The detachment of asset prices from fundamentals renders traditional valuation metrics moot, opening doors to stratospheric ascents akin to reaching "the moon."
Could a company that was trading at 1,400 times its revenue reach 3,000 times its revenue in an explosive manner? Such leaps are plausible in this domain isolated from tradition. The mystique surrounding Trump, whose tendency for exaggerations makes it difficult to discern fact from fiction while preserving his attractiveness, is a reflection of this separation from reality. Critics who are puzzled by Trump's enduring charm fail to acknowledge that he and his company are assessed according to quite different criteria. DJT's followers, the man and the stock, inhabit a world where traditions are non-existent and perception dominates reality.