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Why Trump’s digital media venture differs from other money-losing startups.

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Former president Donald Trump’s digital media firm is losing a lot of money. But how is it different from other “startups,” which frequently struggle to turn a profit for years, if ever?


There are a couple of reasons why Trump’s media is different.

To summarize, Trump Media and Technology Group (TMTG) recently merged with Digital World Acquisition Corp. in a SPAC, an ill-fated financial structure that is frequently used as a last resort for a significant capital injection. The corporation is listed on the NASDAQ under the symbol $DJT.

Going public requires disclosing your finances to the entire world, and TMTG has submitted its first quarterly financial report with the SEC, which anybody can view and study. The financial press is having a field day, but the bottom line is that TMTG is losing a lot of money while creating almost nothing. The firm lost $58 million on $4 million in revenue.

Those willing to be kind to a digital company attacking entrenched rivals, regardless of its “mission” or leadership, may legitimately conclude that this disparity is normal among early-stage organizations with huge ambitions. And so it is—who can forget how Uber ran at a massive loss for years in order to damage the taxi industry’s economic model?

TMTG is seemingly similar, particularly in that it does not generate revenue. However, this does not imply that it is a company poised for rapid development. There are three major, clear reasons why:


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TMTG is not increasing. Truth Social, TMTG’s principal business, has failed to reach more than a few million subscribers. It has not shown the type of traction that any startup would require to claim to be the next great thing or anything at all. The very low revenue statistics indicate that its sole source of income, advertisers, are unwilling to pay for the audience that exists. And there’s no reason to believe this will change.

TMTG does not have a VC runway. Venture capital is a high-risk, high-reward strategy in which fundamentally unproductive enterprises are propped up until something happens and they can generate revenue. This allows entrepreneurs to take risks such as overhiring, charging too little, and kicking the “business model” down the road, sometimes permanently. If investors are confident and the product has traction, such as Uber, they will pump billions of dollars into it, knowing that they will eventually recoup their investment. However, even for a venture capitalist, Trump is a dangerous gamble in his current form. However, all of this is irrelevant because:

TMTG is now responsible to its shareholders. Small startups may be required to report to their VC masters on occasion, but they have greater freedom than public corporations, which have a fiduciary obligation to their shareholders. Though Trump is the largest TMTG stakeholder at 60%, the remaining 40% are keeping a watchful eye out for any breach of this responsibility, such as a fire sale of shares or a loan that significantly undervalues the firm. But the crucial point here is that TMTG does not have the freedom to toss money about (they don’t have much anyhow) or take risks. The core premise behind going public is that you have a firm that people want to invest in; TMTG does not.


As a result, as experts have already pointed out, $DJT is fundamentally and dramatically overpriced. The firm is unlikely to produce a profit in the near future, let alone one sufficient to justify its share price and multibillion-dollar value. Even the most optimistic forecasts probably see solvency as a long-term objective.

On the other hand, given the majority owner’s personal, political, legal, and financial problems, there is a very real possibility that the entire operation may implode before the end of the year.

The truth is that the share price has no relationship to the company’s performance, making it basically a “meme stock” that will be valued arbitrarily and may be controlled by public investors.

While this may earn a few day traders and short sellers money in the next days and weeks, it is not the type of item that will keep value over time, especially given TMTG’s lack of assets. By the time Trump is able to sell his shares, this firm will most certainly be valued much less than it is today. It’s not even worth what it was this morning, since the stock has fallen more than 20% since the market started.

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