Trump Media & Technology Group (DJT), the parent company of Donald Trump's social media platform Truth Social, sank more than 21% Monday following a blockbuster debut last week.

Key Takeaways

The stock drop comes on the heels of an updated regulatory filing early Monday that showed the company taking on heavy losses and facing "greater risks" associated with the former president's ties to the platform.

Financial Performance

According to the filing, Trump Media reported sales of just over $4 million as net losses reached nearly $60 million for the full year ending Dec. 31. The company warned it expects losses to continue amid greater profitability challenges.

"TMTG has historically incurred operating losses and negative cash flows from operating activities," the filing read. "TMTG expects to continue to incur operating losses and negative cash flows from operating activities for the foreseeable future, as it works to expand its user base, attracting more platform partners and advertisers."

Risks and Challenges

Truth Social has lured about 9 million users since its inception. But its success largely depends on the "reputation and popularity" of former President Donald Trump.

"TMTG may be subject to greater risks than typical social media platforms because of the focus of its offerings and the involvement of President Trump," the company said, citing risks that include the harassment of advertisers and criticism of Truth Social's moderation practices.

Advertising and Revenue

The filing also revealed that Trump Media heavily relies on advertising, with ad sales contributing to a "substantial majority of our revenue." However, a decline in the number of users or user engagement could lead to a reduction in advertising spending, harming the company's business and operating results.

Future Outlook

Trump Media maintains a roughly 60% stake in Truth Social, currently worth around $3 billion as of Monday's closing price. The company's stakeholders are subject to a six-month lockup period before selling or transferring shares, with the only exception being a special dispensation from the company's board, which experts suggest could lead to lawsuits.

Consider the context

Trump Media went public on the Nasdaq after merging with special purpose acquisition company Digital World Acquisition Corp. in a deal approved by shareholders late last month. The former president founded Truth Social after he was kicked off major social media apps like Facebook and Twitter following the Jan. 6 Capitol riots in 2021.

In the filing, Truth Social maintained its goal of providing a "'home' for cancelled content creators" and a space to hold "honest global conversation without fear of being censored or cancelled" due to political viewpoints.