Trump Media share price 'the greatest feat of chutzpah ever seen' in stock market: expert

Stock in the newly-public Trump Media company is completely worthless as a financial investment, and only exists for political purposes, wrote John Rekenthaler, a prominent financial expert and the director of Morningstar Research Services, in a blistering editorial for MSNBC on Wednesday.

This comes after the stock in the company, which oversees the former president's Truth Social platform, surged to a high of over $66 a share following the merger that took it public, but has been on a downward spiral ever since, and as experts sound the alarm that Trump's public promotion of the stock, which reportedly netted him billions in wealth, could run afoul of federal securities rules. Despite all this, the CEO, former Congressman Devin Nunes, is set to receive a $600,000 "retention bonus."

The initial valuation of the stock, which trades as DJT, would put the company's worth at $9 billion — which, Rekenthaler argued, is ridiculous by any measure.

"In 2023, Trump Media received $4.1 million in revenues," he wrote. "Most news accounts of Trump Media’s financial report emphasized the company’s $58 million loss that year, but that amount of red ink, by itself, isn’t the problem. There’s nothing amiss with losing money to make money. The problem for Trump Media is that its sole operation, Truth Social, is highly unlikely to ever make money. Not only were its annual sales paltry — only slightly above that of a typical McDonald’s franchise — but those sales dwindled as the year progressed. The platform headed in the wrong direction."

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Valuing a company that generated only $4 million in revenues last year at $9 billion, he wrote, is "the greatest feat of chutzpah I have ever seen in the U.S. stock market."

To put that in perspective, the normal price/sales ratio for a publicly traded company — in other words, its stock price compared to its income — is between 1 and 2. The electric car manufacturing giant Tesla has long been accused of having a grossly overvalued stock, hyped up by Elon Musk enthusiasts, as its market cap has dwarfed 5 of its largest competing automakers combined despite selling fewer cars than any of the legacy manufacturers; it had a price/sales ratio of 23 when it first went public and it is just under 6 now. For Trump Media, though, the price/sales ratio is about 1,500.

The only explanation for a number like this, Rekenthaler said, is that people are holding the stock as a sort of membership in the MAGA club — in other words, it's "no more than a political bet."

"Trump Media was trading at $37 per share midday Tuesday. There isn’t a chance it’s worth that much by conventional standards," he concluded. "The questions for its investors is how long the stock will continue to defy those standards and when it will join the rest of the marketplace in this universe."