Forbes editor predicts Trump stock prices could fall another 90%

Summary

Truth Social, the social media company associated with Donald Trump, experiences a significant drop in share value, plunging over 18%. The company plans to issue an additional 21.5 million shares to raise funds, a move that could lead to further dilution and loss for existing investors. Trump himself has lost nearly $3 billion in less than three weeks since the company went public. Forbes' senior editor, Dan Alexander, warns small investors who support Trump that they may face substantial losses due to the stock's structure, which favored Wall Street insiders and Trump at discounted rates. The company's valuation is considered overestimated based on its user base and revenue, with a potential for the stock to decrease by another 90%. Bankruptcy is not ruled out, posing a significant risk for those who have invested their savings.

Takeaways

• 📉 Truth Social's stock price plummets more than 18% due to the company's decision to issue an additional 21.5 million shares.
• 💰 The social media company is experiencing financial difficulties, hoping to raise funds through the sale of new shares.
• 🔄 Issuing new shares leads to the dilution of existing shares, causing their value to decrease and negatively impacting the share price.
• 📉 Since going public, Truth Social's share price has already halved, resulting in significant losses for investors, including Donald Trump who has lost almost $3 billion on paper.
• 🤝 Dan Alexander, the senior editor at Forbes, explains that the stock was structured in a way that benefited Wall Street insiders and Trump at the expense of retail investors.
• 💸 Retail investors, many of whom are small-time supporters of Donald Trump, have invested large sums of money, potentially facing substantial losses.
• 🏦 The company's fundamentals indicate a much lower valuation, with the public markets currently valuing it at $3.5 billion.
• 📉 Dan Alexander suggests that the stock could potentially fall by another 90% before aligning with the company's metrics.
• 🚨 The company's own filings indicate concerns about its ability to continue as a going concern, with bankruptcy not ruled out as a possibility.
• 🤔 Investors who have put their faith and money in Trump and his company may face significant financial loss, especially those who have invested their life savings.
• 📈 A comparison with other social media companies like Twitter or Facebook highlights the discrepancy in valuation and the potential for Truth Social's stock to continue its downward trend.

Q & A

What happened to Truth Social's stock price recently?

Truth Social's stock price tanked, plunging more than 18% due to the news that the company is putting an additional 21.5 million shares up for sale.

Why is the social media company offering more shares for sale?

The company is experiencing financial difficulties and aims to raise funds by issuing more shares.

What is the impact of issuing new shares on existing shareholders?

Issuing new shares leads to the dilution of already existing shares, causing them to lose value.

How much has Donald Trump lost since the company went public?

Donald Trump has lost almost 3 billion dollars on paper since the company went public less than three weeks ago.

What does the stock's performance say about small investors who believe in Trump?

Small investors who bought into Trump's company because of their belief in him are likely to be deluded and may end up losing money.

How were Wall Street insiders and Trump involved in the company's stock deal?

The stock deal was set up in a way that allowed Wall Street insiders and Trump to get in at very discounted rates.

What does the retail shareholder's experience reflect about the stock's performance?

Retail shareholders who invested large sums have seen significant losses, as those who bought shares when it peaked at $66 per share have now lost half their money.

What does the fundamentals analysis of the company suggest about its valuation?

The company's fundamentals, including user numbers and revenue generation, suggest a valuation in the hundreds of millions of dollars at most, implying that the stock could fall by at least another 90%.

What is the company's current market valuation?

The public markets currently value the company at three and a half billion dollars.

What potential future issues do the company's own filings indicate?

The company's own filings indicate that its accountants have concerns about whether it could continue as a going concern, suggesting that bankruptcy is a possibility.

How does the company's situation compare to other social media companies like Twitter or Facebook?

When comparing the company's fundamentals to those of other social media companies like Twitter or Facebook, it appears that the stock should continue to decrease drastically due to the significant gap in user base and revenue.

Outlines

00:00

📉 Truth Social's Stock Plunge and Share Dilution

The paragraph discusses the significant devaluation of Truth Social's stock, plummeting over 18% in a single day. This decline is attributed to the company's decision to issue an additional 21.5 million shares for sale. The move is seen as a desperate attempt to raise funds amidst financial struggles. However, this strategy leads to share dilution, which diminishes the value of existing shares and has already resulted in a 50% drop in share price since the company went public. The situation has caused substantial losses for Donald Trump, amounting to nearly 3 billion dollars on paper. The narrative further highlights the plight of small investors who backed the company out of belief in Trump, only to face the likelihood of financial loss. These investors, unlike Wall Street insiders and Trump himself, bought shares at much higher rates, putting their savings at risk. The senior editor at Forbes, Dan Alexander, warns that the stock's valuation, based on the company's user base and revenue, should be significantly lower, suggesting a potential further decline of up to 90%. He cautions that bankruptcy is a possibility for Truth Social, given its precarious financial position and the fundamental discrepancies when compared to other social media giants like Twitter and Facebook.

Keywords

💡Truth Social

Truth Social is a social media platform being developed by the Trump Media & Technology Group (TMTG), led by former US President Donald Trump. In the context of the video, it is highlighted that the company's stock value is plummeting, indicating financial struggles and investor skepticism.

💡stock dilution

Stock dilution occurs when a company issues new shares, increasing the total number of shares available. This can decrease the value of existing shares since the ownership percentage of current shareholders is reduced. In the video, the company's decision to issue more shares is leading to a dilution of existing shares, negatively impacting their value.

💡share price

The share price is the cost at which a single unit of a company's stock is available for purchase. It is a crucial indicator of a company's market performance and investor confidence. In the video, the share price of Truth Social has fallen significantly, reflecting the company's financial challenges and the impact of stock dilution.

💡Donald Trump

Donald Trump is the 45th President of the United States and the figure behind the Trump Media & Technology Group. In this context, his association with Truth Social is a significant factor influencing investor sentiment and media attention towards the company.

💡Wall Street insiders

Wall Street insiders refer to individuals with privileged access to non-public information about a company, often including employees, executives, or major shareholders. In the video, these insiders are depicted as having bought shares at discounted rates, gaining an advantage over retail investors who bought in at higher prices.

💡retail shareholders

Retail shareholders are individual, non-professional investors who buy and sell stocks for their personal accounts. In the video, these investors are shown to be at a disadvantage, having paid higher prices for shares compared to insiders and potentially facing significant losses.

💡valuation

Valuation is the process of determining the economic value of an asset or a company, often based on its financials, market position, and potential for growth. In the context of the video, the company's valuation is discussed as being potentially overestimated, given its current user base and revenue generation.

💡public markets

Public markets refer to the platforms where buyers and sellers can trade securities, such as stocks and bonds, in a transparent and regulated environment. In the video, the public markets' valuation of the company is mentioned as being significantly higher than what the fundamentals would suggest, indicating a potential misalignment.

💡bankruptcy

Bankruptcy is a legal process that allows a person or a company to eliminate or repay their debts under the protection of the federal bankruptcy court. In the video, the possibility of bankruptcy for the company is mentioned, indicating severe financial distress and uncertainty about its future.

💡fundamentals

Fundamentals refer to the core financial metrics and health indicators of a company, such as revenue, expenses, and user base. In the video, the fundamentals of the company are compared to other social media companies to argue that its current valuation does not align with its actual business performance.

💡going concern

A going concern is an assessment that a company will continue its operations for the foreseeable future without the risk of liquidation. In the video, doubts about the company's ability to continue as a going concern are raised, indicating concerns about its long-term viability.

Highlights

Truth Social's stock price plummets, dropping more than 18%.

The social media company plans to issue an additional 21.5 million shares for sale.

The company's financial struggles lead to the need for raising funds through share issuance.

Existing shares lose value due to dilution caused by the issuance of new shares.

Donald Trump's personal losses amount to nearly 3 billion dollars on paper since the company's public debut.

The stock price of Trump's media company has halved since its public listing less than three weeks ago.

Small investors, many of whom are Trump supporters, are likely to face significant financial losses.

Wall Street insiders and Trump received shares at heavily discounted rates, unlike retail investors.

Retail investors, some of whom invested life savings, are at a higher risk of loss.

One investor, confident in Trump's leadership, put a substantial portion of his life savings into the company.

The company's fundamentals indicate a potential for a further decline in stock value.

The valuation of the company should be in the hundreds of millions, but it's currently valued at 3.5 billion.

The public markets' valuation suggests the stock could drop by another 90%.

Investors who blindly support Trump and his company could stand to lose a substantial amount of money.

Small-time investors who bought shares at peak prices could face catastrophic financial loss.

The company's own filings indicate that bankruptcy is a possibility due to fundamental issues.

Comparing the company's fundamentals to other social media giants like Twitter or Facebook shows a significant discrepancy.

The stock's current trajectory suggests a potential for it to lose all its value.

Transcripts

Tonight, Truth Social tanking.

Donald Trump shares today

plunging more than 18%.

The latest plunge coming

amid news that the social media company

is putting another 21 and a half

million shares up for sale.

Companies bleeding money,

so they want to issue more shares

to raise the money.

But of course, when you issue new shares,

that means the already existing shares

get diluted,

they lose value

and the share price

has already fallen by half.

Trump himself

has actually lost almost 3 billion

since tweets

social went public

less than three weeks ago, all on paper.

OUTFRONT now, Dan Alexander,

the senior editor at Forbes.

So, Dan, you know,

flooding the market with new shares.

What is the bottom line

for small investors

who bought into Trump's company

because they believe in him?

Well, the bottom line is that

they're going to get deluded

and this makes it more likely

that they are going to lose money.

The problem here is that

this stock was set up

and the deal was set up

in a way

that allowed a lot of Wall Street

insiders and Trump

and other people involved in this company

to get in at very, very discounted rates.

Meanwhile, all the retail shareholders

were putting up

huge sums to buy in,

and the ultimate effect

is that they put in the cash

and the other people

walk away with the shares.

I mean,

it is unbelievable,

as you point out, right.

Trump and the insiders

who got the shares for

rock bottom, right,

that it goes public

and the people who buy it,

those prices get hurt the most.

I mean, anyone who bought Trump

media shares

when it peaked

and I guess, Dan, that was,

what, $66 per share.

So they've now lost half their money.

And just to be clear,

people who got in

and bought at that price were not inside,

you know, sophisticated

Wall Street insiders.

Right.

These were small time

investors who support Donald Trump,

wanted to support his company.

There was a person who put a large chunk

of his life savings in this company.

He told The Washington Post,

Dan, I know good and well

it's in Trump's hands and he's got plans.

I have no doubt it's

going to explode sometime.

I mean, that's actually

makes me really sad.

I mean, how do you even react to that?

Yeah,

it is a sad story,

you know,

And the trouble here is that

if you look at the fundamentals

of the company,

it's poised to go down a lot more.

If you look at the number of users

that this company has,

an amount of revenue that it generates.

You know, it's

valuation should be measured

in the hundreds of millions of dollars

at the most.

Right now,

the public markets are valued

at three and a half billion.

So that means that this

stock should fall by at least another 90%

before the metrics start

to make any amount of sense.

And for people who are just blindly

putting their faith in Trump

and in the company,

that means that they could

stand to lose a lot of money.

And if somebody just throwing

a couple of thousand bucks

that they have extra.

Okay, fine.

Now, people

donate to political campaigns, too.

But if somebody is putting

a significant chunk

of their life savings into it,

they could really get wiped out

by the very person

who they're trusting their money to,

saying

this guy is going to make this company

an amazing venture.

I mean, it's incredible.

You're saying these things

that we already look at something

that's lost half its value

since it's since March 26,

Half its value.

But you're saying it could

go down another 90%?

Yeah, there's no question.

I mean,

if you look at the company's own filings,

you know, they're saying that

that its accountants

had questions about

whether it could continue

as a going concern.

They're saying that bankruptcy

is not out of the question eventually.

So this thing could go

to zero eventually.

But just if you look at the

actual business

fundamentals right now

and you stack that up against,

for example,

the valuation of Twitter or Facebook,

you know,

some other social media companies

and you try to correlate

does make it make sense

if we're so far away from that point

right now that it looks like this

stock should continue

following drastically.

All right.

Thank you very much.

Dan, good to see you.