Trump loses $1.3 billion in net worth after worst day ever for his social media stock

New York
CNN
—

After a ridiculous surge over the past five weeks that had absolutely nothing to do with the company’s actual business, former President Donald Trump’s social media stock is suffering a sudden setback.

Truth Social owner Trump Media & Technology Group’s stock price fell 22.3% on Wednesday. It marks Trump Media’s worst one-day loss since it went public in March, narrowly eclipsing a 21.5% loss on April 1.

At Tuesday’s close above $51, Trump’s controlling stake in the company was valued at about $5.9 billion. At the end of trading on Wednesday, the value of Trump’s shares fell to $4.6 billion. That means Trump lost $1.3 billion in net worth in a single day.

It’s not clear exactly what caused the sharp turnaround for Trump Media, whose stock price has become a proxy for how traders think this election will play out. Trump Media did not release any major news to explain the nose dive.

Some traders blamed the steep selloff on technical factors and a loss of momentum for what has become a meme stock.

Trump Media’s stock has been extraordinarily volatile all year. The stock does not need official company announcements to move dramatically higher or lower.

Until Wednesday, it had gone in one direction: Straight up.

Between September 23 and Tuesday’s closing bell, Trump Media had quadrupled in value. The breathtaking rally has been fueled by bets on Wall Street that Trump will win the White House.

The huge gains boosted Trump Media’s value to $10.3 billion at Tuesday’s close. That means the card was worth more than the implied value of X, the Elon Musk-owned social network formerly known as Twitter.

That’s despite X having about 70 million monthly active US users on iOS and Android like Truth Social, according to Similarweb data shared with CNN. That’s about 100 times Truth Social’s 698,000 monthly active US users.

Even Threads, Meta’s relatively new X competitor, has about 20 times the user base of Truth Social, according to Similarweb.

Trump Media’s fundamentals remain very modest for a company still valued at more than $8 billion.

For context, CBS owner Paramount Global, a company that Trump Media recently surpassed in market capitalization, has brought in more than $14 billion in revenue so far this year.

But Trump Media has only generated $1.6 million in revenue this year.

“Fundamentally, the valuation is a head-scratcher, but we’ve seen other meme stock narratives like AMC and GameStop on similar paths the past few years,” Dan Ives, senior equity analyst at Wedbush Securities, told CNN in an email. “Truth Social is a fraction of X and other social media platforms in terms of users, but with an election a week away, this stock has become a litmus test for some investors in the White House race.”

Matthew Tuttle, CEO of Tuttle Capital Management, blamed Wednesday’s selloff on Trump Media’s share price failing to break through key resistance to the upside.

“That’s the way the game is played on this,” Tuttle told CNN. “The smarter traders know you make your money and get the hell out of there. And let the not-so-smart traders hold the bag.”

Tuttle noted that one of the factors that helped propel Trump Media higher had been the fact that borrowing stocks to bet against it is very expensive. He described “absolutely insane” financing costs for borrowing shares.

“That makes it virtually impossible to short this thing,” Tuttle said.