A solid dose of reality for Trump Media and Technology with the appallingly weak financials revealed for the key asset, Donald Trump’s Truth Social social media platform which is a big blob of red ink and perhaps not viable.
The shares lost more than 21% on Monday after last week’s huge surge as the company revealed details of its performance in 2023. At one stage the shares had lost 25%.That saw the value of the company slump, wiping more than $US1 billion off the value of Donald Trump’s 57%.
After last week’s merger with Digital World Acquisition Corp, a cash shell, and renaming, the company was required to file (via what is called an 8-K statement) updated financials and other material for the 2023 year (to the end of December).
It wasn’t pretty reading – even if you are just interested in being what’s called a ‘meme investor’ and following Trump Media for the name and not the credibility.
The SEC filing revealed the social media company lost $US58.2 million (nearly $A90 million) in 2023, a performance that saw the company’s auditor disclose “substantial doubt” over Trump Media’s ability to continue operating.
That’s a loss of more than $US1 million a week.
The filing also revealed the company generated just $US4.13 million in revenue last year, including less than $US1 million in the last quarter of 2023.
The company paid nearly $US40 million in interest expenses last year (mostly on promissory notes, many of which have matured but haven’t been called yet) and racked up about $US16 million in operating losses.
It only had cash on hand of $US2.57 million at the end of December, down from $US9.8 million a year earlier.
It had accumulated deficits (losses) of more than $US66 million at the end of 2023, up sharply from $US8.5 million a year earlier.
While $US4 million in sales marks significant growth from $US1.47 million in 2022, the it underlines the almost irrelevant size of Trump Media’s operation.
Given that it's no wonder than the auditor, BF Borgers of Colorado, said the losses “raise substantial doubt about its ability to continue as a going concern”.
The market slide raises questions about whether trump can monetise any of his 78.75 million shares without blowing up the share price.
Trump cannot sell his shares or use them as collateral for a loan for six months due to a provision in the company’s merger agreement, known as a lockup.
The company’s board could vote to waive that requirement but has yet to do so, the SEC filing stated.
Cashing out early could sink the stock price further by flooding the market with shares and undermining investor confidence in Trump’s commitment to the company.
And how will the company grow and prove it is a ‘going concern’?
Well, in the SEC filing Trump Media said it expects to incur more “operating losses and negative cash flows” as it works to expand its user base but that it expects its growth will come from Truth Social’s “overall appeal.”
But before it gets there, it has its March quarter financial report to release in the next six weeks or so.
And as forecast the company didn’t reveal performance indicators like those common across the tech industry, such as its number of active users. Focusing on those numbers, the company said, “might not align with the best interests” of Trump Media or its shareholders.
