Media pronounces doom as Truth Social goes public, but financials leave room for optimism

The Trump Media & Technology Group went public last week in after a long-delayed merger with a special purpose acquisition corporation that ultimately led to a significant uptick in market cap ahead of its NASDAQ debut. But the stock subsequently experienced a significant decline in market value, resulting in media prognostications of financial ruin that were compounded by the firm's filing of key financial statements.

TMTG went public March 26 using the ticker DJT in homage to former President Donald J. Trump, its majority shareholder. The debut followed a long-delayed merger with Digital World Acquisition Corp (DWAC) that had faced considerable scrutiny from the U.S. Securities and Exchange Commission (S.E.C.).

Ahead of that debut, the share price surged substantially, resulting in a significant, if temporary, surge in Trump's own net worth. Shares closed on March 27 at $66.22 and fell to $48.66 by April 1. They have declined in value with some consistency since that point.

The falling stock price led to pervasive media reporting, including renewed discussion of the stock become a prime target for short-sellers on the market. A subsequent SEC filing also revealed the company had more than $58 million in operating loss in 2023.

Collectively, falling stock prices and operating losses could signal dubious prospects for growth in the long-term for the firm that operates Truth Social. A closer look at some of their key numbers and public statements, however, appears to suggest that company is on stronger footing than reporting has indicated.

Stock price has doubled this year

DJT closed on Monday at $37.17 per share, substantively lower than the March 27 close of $66.22, yet still above its March 22 close of $36.94. March 22 was the Friday before the stock went public. Note that DJT traded as DWAC prior to the merger.

Moreover, the company's has more than doubled since mid-January, with the share price closing at $17.32 on Jan. 12. Prior to that point, the firm consistently traded in the $15-to-$20 range.

Short-sellers losing money

Expectations of a sustained decline often prompt attempts at short-selling a stock, in which the short-seller borrows the share and sells it at market price in anticipation that it will decline in value. The short-seller then repurchases and returns the share at lower price and pockets the difference.

Such was the case with Truth, though the success of the merger threw a wrench into the plans of many short-sellers.

A New York Times report earlier this month, titled "Traders Are Betting Millions That Trump Media Will Tumble," highlighted that short-sellers had lost $126 million in March short-selling the stock, citing data from S3.

It's getting harder to short the company as well.

Of the firm's roughly 137 million shares, only about 5 million are available to short-sellers and about 4.9 million were on loan as of early April, at which time the company was the most shorted special purpose acquisition vehicle, per the NYT.

Accordingly, the fee to borrow a share of DJT has risen to a 550% annual interest rate on the current share price, S3 Managing Director of Predictive Analytics Ihor Dusaniwsky told the outlet.

Operating losses appear to be mostly "non-cash" payments

Earlier this week, a Washington Post report highlighted filings showings that Trump Media earned $4 million in revenue but posted a more than $58 million operating loss. Indeed the company's consolidated statement of operations showcased both numbers.

But much of the $58 million operating loss comes from the single line item "interest expense" that includes more than $39 million. Notably, the same $39,429,100 figure reappears in the statement of cash flows as a "non-cash interest expense on debt."

CEO claims available cash has soared since IPO

Trump media reported a mere $7.2 million loss in cash over 2023 and that it had $2.57 million available at the end of the year. But CEO Devin Nunes this month claimed the company had accumulated a considerable store of cash following the IPO and had paid off all of its debts.

"We are excited to be operating as a public company and to have secured access to capital markets," he said. "Closing out the 2023 financials related to the merger, Truth Social today has no debt and over $200 million in the bank, opening numerous possibilities for expanding and enhancing our platform. We intend to take full advantage of these opportunities to make Truth Social the quintessential free-speech platform for the American people."

Publicly available financial data on Trump Media includes only the year-end statements, so the current state of its finances remain murky. The company reported more than $70 million as of Dec. 31, 2023, so should Nunes' claim of no debt be interpreted liberally, it could suggest the company raised at least $270 million in cash by going public.

The company has its sights on expansion

Prior to the stock market debut, Nunes highlighted the prospective windfall and indicated much of it would go toward financing improvements to the platform and attracting new users.

"I jokingly say we now get to become an actual startup with real financing, and getting access to the capital markets that most conservative companies have had a tough time to do," he said on the "Just the News, No Noise" television show last month. 

"Because remember, we're a real threat. We're trying to create an opportunity so that people can always access the internet, but they're not going to be shut down by Big Tech... And we're one of the only games in town. And now we're actually going to be a true startup. So we're very pleased."

He went on to highlight the popularity of the platform's groups feature, adding that "[t]he other issue that we've disclosed publicly ... we've got 1000s of people now that are testing out our new streaming capability."

"So that's something we're looking at is streaming, we've been testing it, developing it. So stay tuned. There's there's more to come," he said.

Ben Whedon is an editor and reporter for Just the News. Follow him on X, formerly Twitter.