What to Know About Trump Media’s Stock Debut

On its first day on the Nasdaq stock exchange on Tuesday, Trump Media & Technology Group became such a high-flying stock that trading in its shares, under the ticker DJT, had to be briefly halted because of extreme volatility.

The huge public debut for the company is especially important for its biggest shareholder, former President Donald J. Trump, whose 60 percent stake is now worth about $4.6 billion on paper.

Here’s what you need to know.

Wait, Trump Media is worth how much?

After Tuesday’s trading, Trump Media had a market value of nearly $8 billion. That makes it larger than corporations like Mattel, Alaska Airlines and Western Union.

It made only $3 million over most of last year. How can it be worth billions now?

Trump Media’s valuation is disproportionately high compared with other social media companies. The company took in $3.3 million in the first nine months of 2023 and recorded a loss of $49 million, yet its market value — based on Tuesday’s share price — is nearly 2,000 times its estimated annual revenue.

Trump Media’s main asset is Truth Social, the digital platform that Mr. Trump describes as an alternative to Twitter and that he uses for reaching supporters and attacking critics.

Investors sometimes justify lofty valuations given to small companies operating at a loss because of anticipated growth or the expectation that other investors will continue to bid up shares. Still, other social media companies trade at far lower price-to-sales ratios than Trump Media’s: Reddit is around 10, Meta is 7 and Snap is 6, according to FactSet. Superstar tech stocks like the chipmakers Nvidia and ARM trade at price-to-sales ratios of about 25.

Trump Media’s trading patterns have acted somewhat like those of a so-called meme stock — companies, like GameStop and AMC Entertainment, that retail investors took to dizzying heights during trading manias at the height of the pandemic.

How many users does Truth Social have?

Truth Social is a relative minnow in the social media universe. Since its introduction in early 2022, its app has been downloaded 10 million times, including three million times last year, according to Sensor Tower, a data provider. By comparison Meta’s Threads had 171 million downloads between its July debut and November.

Last month, Truth Social had five million desktop and mobile visitors, according to Similarweb, a data and analytics company. That was more than the 1.7 million visitors for Gettr.com, another alternative social platform, but a small fraction of Facebook’s three billion monthly active users.

Mr. Trump has 6.5 million followers on Truth Social, and he had 87 million on Twitter before his account was suspended.

Where did the company come from?

In early 2021, two former contestants on Mr. Trump’s reality TV show, “The Apprentice,” Andy Litinsky and Wes Moss, hatched a plan to create a conservative media giant centered on Mr. Trump after Twitter barred him in the wake of the Jan. 6 attack on the U.S. Capitol. Mr. Trump liked the idea, and an agreement was signed weeks later. The company, Trump Media & Technology Group, introduced Truth Social in 2022 as Mr. Trump’s primary bullhorn.

The goal all along was to take Trump Media public through a merger with a special purpose acquisition company, or SPAC. The sole purpose of such shell companies is to raise money from investors and merge with an operating business, which then becomes the publicly traded entity.

After many delays, Trump Media merged on Monday with a shell company, Digital World Acquisition Corporation, and started trading on Tuesday.

Who’s buying the stock?

Trump Media’s shareholders tend to be individual investors, rather than institutions. Many say they are buying the stock as a sign of support for Mr. Trump personally and his support for an alternative social media platform.

“We do appreciate President Trump, but it’s more about free speech,” said Mark Willis, 63, who lives in Indian Trail, N.C. “We believe this is the only social media platform that is not heavily influenced by the government.”

Scott Lewczak, a graphic designer in Nokesville, Va., and another longtime shareholder, said that he was going to make money on the big surge in the price of Trump Media, but that his investment was to support Truth Social and Mr. Trump.

“Even if I lose every penny, I will fight to the end,” Mr. Lewczak said.

Could Trump Media help bail Mr. Trump out of his legal mess?

Mr. Trump is, on paper, a richer man because of Trump Media. But tapping that money to help with his legal problems may not be easy.

The merger between Trump Media and Digital World includes restrictions that prevent major shareholders from selling shares for at least six months, or using them as collateral for loans. But because Mr. Trump controls so much of Trump Media, and because his allies are expected to make up a majority of the new board, they could waive those restrictions on his request.

On the other hand, if Mr. Trump wanted to sell some of his Trump Media shares, that could lower the share price, or prevent it from rising higher.