Truth Social's investors brushed off Trump warnings — and it's cost them fortune: analysis

Investors in former President Donald Trump's media company were repeatedly warned that the value of the shares could be adversely impacted by the former president's legal problems — but many did not listen and they're now paying the price, wrote Samuel O'Brient for InvestorPlace.

Trump Media, which runs the former president's Truth Social platform that he uses to make public statements, has plunged to its lowest share price in months, after it had rallied from its previous lows for a few weeks. Even now, the stock price is dramatically overvalued relative to the company's revenue.

"Trump Media, TheNew York Times points out, issued plenty of warnings about the risks connected with any of the four criminal cases Trump was involved in, including an S1/A filing that stated: 'President Donald J. Trump is the subject of numerous legal proceedings. An adverse outcome in one or more of the ongoing legal proceedings in which President Donald J. Trump is involved could negatively impact' the company as a whole and TMTG’s platform Truth Social," wrote O'Brient.

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This ultimately came true when Trump was both found civilly liable for hundreds of millions over property valuation fraud, and convicted on 34 felony counts of falsifying business records for the hush payment scheme to adult film star Stormy Daniels. The former president plans to appeal both of these verdicts.

"As of this writing, DJT stock is down more than 23% since May 30, failing to garner any real momentum. But why hasn’t it fallen further?" wrote O'Brient. "There are two reasons. Yes, even as his legal troubles continue to trend and his future hangs in the balance, Trump’s national profile will keep the company in full focus as the 2024 election draws near. The stock is also benefiting from its status among retail investors who see it as a way of betting on Trump and showing their support for him. Following the former president’s conviction, users took to Truth Social to show their support and hype up DJT stock. 'It’s almost time to show them what DJTArmy is all about!!!! Buy more today and hollllllld,' one user posted."

"Trump’s history with financial markets isn’t good," concluded O'Brient. "DJT shareholders are ignoring the risks posed to them by the company itself and they will likely regret it."