Trump Media & Technology Stock: No Fundamentals Here (NASDAQ:DJT)

introduction

Trump Media and Technology Group (Nasdaq: DJT) It has seen significant fluctuations since the beginning of the year and is currently up 163%. I wanted to check the company’s financials, but the price action has nothing to do with fundamentals and all To do to Mr. Trump and his fanatical followers. The play here is high risk and high reward, but I think the odds of making money from this play are against the rational investor. Short selling is not recommended due to the ridiculous fees, and the market will almost certainly remain irrational for longer than you can still be able to pay on this stock on fees alone. In my opinion, the company is not worthy of investment

Finance in a nutshell

So, let’s dive in, shall we? DJT has about $270 million in cash and cash equivalents, including restricted cash, as of Q1 2024. That’s a fair amount of additional cash from Previous quarter. This increase was proceeds from the business combination and the issuance of TMTG Convertible Notes. There is no religion, so at least there is that. I would normally say that this type of situation is a good thing for a well-running company, however, DJT may not be.

The company’s revenues fell by 31% year-on-year, while the costs of operating the platform swelled. In the last quarter alone, the company saw a loss of $327.6 million, at -$3.61 per share. Most of the increases in expenses were the result of increased stock-based compensation. Again, if it were another company, such as a fast-growing company with a small market cap, I would be okay with over-SBC. However, DJT is an $8 billion company with revenues of less than $800,000. I had to double check if I was reading the quarterly statement correctly, because it’s hard to believe that the company is bringing… Eight hundred thousand dollars In revenue, while being evaluated Eight billion dollars.

Some may argue that the company is investing for the long term and such losses are to be expected. Again, there can be debate about this, but with revenues down, the clock is ticking.

There isn’t much to say about the financials that hasn’t been covered before. The staggering difference between net income and expenses is shocking, to say the least. DJT’s $270 million cash cushion will keep it afloat a little longer if the company’s cash burn stays around a quarter of $9 million, and would ideally turn positive to last longer, but we need to see how the whole thing plays out over the next few quarters.

How is revenue generated?

DJT’s business model is based solely on its social media platform ‘Truth Social’. Like all other social media platforms, DJT’s main and only source of income is displaying ads to users on the platform. So, you would think that it would be pretty easy to track this kind of revenue if it related to users, right? Not really, the company doesn’t believe in “traditional KPIs,” like average revenue per user (or ARPU), pricing, ad impressions, or subscriptions. We cannot see the daily active users of the platform or monthly active users as is the case with all other social media platforms and the reason is that the company “Focused on developing Truth Social by enhancing features and user interface” And currently the company “Evaluate the most relevant, reliable and relevant key operating metrics that align with its evolving business model.”

However, let’s assume that these metrics are not a “good fit” for the company’s vision and business model. Assuming that improving features and UI was the ideal solution, why did revenues decrease? To me, it seems that even if the platform is optimized for user ease of use, it is not enough to attract a huge base, and if there is no user base, there will be no advertisers willing to go to the platform.

Also, if the usual metrics aren’t right, how are potential investors supposed to evaluate a company, if there’s no metric they can look at to see how well the company is performing? Revenue alone may not be enough.

Platform

I don’t know how many of you have tried signing up for the platform, but I did recently to see what it’s like. I almost didn’t sign up because I had to check the box to allow the platform to send updates to my phone number. I only realized it was necessary to check the box, even after I’d been holding the “Next” button for longer than I’d like to admit. Now that you’re done, it’s time to check out some tweets in the Discover tab, because I skipped who to follow. Due to its low user base, new posts are few and far between. I can see how people might find it outdated eventually, since it’s basically a private group chat with just one side. I have to say, it was a fairly smooth experience compared to what I’ve experienced; But within a few hours, I deleted my account.

Regarding some of the platform’s metrics, there is a website where you can check some stats, and we can see from the image below that the platform has lost 13% of traffic per month and has been steadily declining since March.

Now, let’s compare the platform with its fierce competition. We can clearly see the huge difference in engagement. It’s no wonder the company makes essentially no money from its platform. There is not enough traffic, and the traffic that comes through is hardly suitable for many advertisers. Speaking of advertisers, a lot of the ads I saw were for Trump merchandise.

The basics don’t matter

This company is similar to GameStop (GME). It has a large following of people who started out as just big fans of the company, regardless of the company’s lackluster performance. DJT has support from Trump fans, who will not sell their shares for any reason. Price movements are not driven by company fundamentals. It seems to be trading based on emotion, and many day traders try to catch these companies that have high volume and momentum to ride the wave, either up or down.

Should you get involved?

I try to stay away from such companies that don’t seem to follow the basics. The price fluctuations are so large daily that you can be left holding the bags for a while until another emotion-filled rally emerges, such as the first presidential debate or the outcome of a hearing. For DJT, a lot of the moves will depend on how the election unfolds, or if anything happens to Trump after the hearing scheduled for July 11.^y. Before that, we also have the first presidential debate on June 27^ySo expect volatility in the stock after that.

You might think that this stock should collapse, it’s only a matter of time, right? Why not short it? Well, yes, but that’s a big time. To short company stock, there is a very limited amount of stock available, and it appears that selling 100 shares of DJT would cost you up to $30,000 a year in interest alone. He doesn’t deserve it. Short sale fees are up to 600%. So, maybe if you already own some shares, and want them to be available to short sellers, you could earn some interest on your shares, but that would defeat your purpose of holding the shares and wanting them to go up rather than supporting the short sellers.

In short, it’s up to you how you want to play this stock, or any other stock for that matter. It’s a high-risk, high-reward situation for DJT, and I’m not willing to take any risks here, especially when more easing is on the way. Its recent S-1 filing states that the company records the issuance of up to 21.49 million shares of common stock, which may consist of common stock upon the exercise of several different warrants, such as subscription warrants and convertible notes after IPO warrants, along with the resale of stock. Owned by “Selling Securities Holders” (recast). It is not yet fully approved and is subject to change.

I don’t know how the company will be able to survive with so little revenue unless it surprises us next quarter. The cash position should keep it afloat for a while if it continues to burn at a similar rate as it did last quarter. Trump is the company’s largest shareholder and the other directors have an embargo period at the moment, so they can’t sell their shares either, but who knows what will happen next. There is a lot of risk involved, and the company is basically not in good shape. You may see a nice swing over the next month or two, seeing as stocks are poised for either direction at the moment. I think it was pretty quiet. I’m staying out of this one for now.