Trump's equity is teetering on the edge of collapse.
Following his TV debate defeat against Kamala Harris, supporters of Donald Trump continue to experience setbacks. Not only did many viewers deem him the loser of the debate, but Wall Street also expressed its judgment: Shares of Trump's Truth Social network plunged by nearly 17% to an all-time low since its initial public offering in late March.
This isn't the only burden for the former president's supporters, as their financial stability is also at risk. Over 600,000 Trump fans invested in Trump Media, Truth Social's parent company, and their shares have already decreased by approximately 75% from their peak shortly after the offering. Another crushing blow may be imminent. Trump has pumped up an unheard-of bubble in Truth Social's stocks, and it could now burst.
With Truth Social, Trump has openly sought to monetize his political career. He remains the largest shareholder, holding 115 million shares, or virtually 60% of the social media platform. After the IPO in March, Trump initially couldn't sell his shares but will be able to do so soon.
Billions to gain or millions to lose
Trump faces a challenging decision: if he holds onto his shares, he foregoes about $2 billion in potential gains, but dumping them would adversely impact not only his wealth but also that of his supporters.
Even before becoming a president, Trump was adept at selling empty promises – whether it was Trump Vodka or Trump Steak. But Truth Social is his most substantial accomplishment: Despite generating just $4.1 million in revenue in 2023, the company is presently valued at 900 times its income. For comparison, Meta, Facebook's parent company, recorded revenues of around $132 billion that year, but is only worth around 10 times its revenue in the stock market. Trump's passionate MAGA supporters don't appear to be concerned about the inconsistencies. They believe everything Trump says, making him practically invincible in the stock market – MAGA, but also gaga.
Trump Media has long been a meme stock – a hyperactive stock whose behavior is more closely associated with social media trends and the former president's political standing than with economic fundamentals. The stock has experienced significant fluctuations due to Trump's conviction in May, an assassination attempt in July, and Joe Biden's withdrawal from the presidential race. The latest plunge came after Trump's poor performance in the debate against Kamala Harris.
Only Elon Musk can save the MAGA fans now
Trump's next move will ultimately decide the fate of his supporters. Despite the potential financial ruin that may befall his fan base, an investor warned against Trump purposefully causing harm to his loyal supporters. Politically, such a move would not reflect well on him. Additionally, Trump has little to no risk in this situation; he's only lending his name and fame to the MAGA network. Losses thus far have only been imaginary.
Yet, the former president faces pressing financial distress, with legal costs and fines from his numerous lawsuits now exceeding half a billion dollars. Furthermore, Trump's claims of being a billionaire are partially under scrutiny, as he struggled to mortgage his properties as part of his bail arrangement in his fraud case. Trump has also previously shown indifference to his investors' plight, having filed for bankruptcy six times in the past, both personally and with his companies. Time is also working against Trump: if he loses the election, the remaining value of his stocks may evaporate entirely. This is his chance to convert part of his MAGA aura into cash.
The top executives at Truth Social seem to understand this, selling multimillion-dollar stock packages recently – including the CEO, chief legal officer, and chief technology officer. Trump's only hope might be a major investor who purchases his shares in a manner that stabilizes the stock price. Doing so could potentially transform Trump's predicament into an opportunity: in exchange for the financial lifeline, he could repay the benefactor if he returns to the White House. With billionaires like Elon Musk or Peter Thiel already financially supporting Trump and desiring a role in a second Trump administration, there are several potential candidates.
The decreasing share prices of Trump Media and Truth Social's network are causing financial hardship for the former president's supporters who invested in these companies. Following the debate loss against Kamala Harris, the share prices of Trump's Truth Social network continued to plummet, affecting the financial stability of many Trump supporters.
