Trump Media’s Nasdaq Debut Marred by Auditor Concerns and Operating Losses
According to a new regulatory organizing, an auditor has expressed concern about former President Donald Trump’s publicly traded company’s capacity to continue operations.
According to a filing with the Securities and Exchange Commission on Monday, Trump Media and Technology Group, which manages the Truth Social platform, lost $58.2 million in 2023 while producing $4.1 million in total sales. Trump Media’s highest expense for the year was interest payments of more than $39 million.
The petition contains a note from an independent accounting firm, Colorado-based BF Borgers CPA PC, saying that Trump Media’s “operating losses raise substantial doubt about its ability to continue as a going concern.” The firm has been working with Trump Media since 2022.
The note is dated March 25, the day before Trump’s company began trading on the Nasdaq stock exchange under the ticker DJT, initially soaring and drawing similarities to so-called meme stocks.
The company’s shares plunged more than 21% to $48.66 on Monday. Its market worth exceeded $6.5 billion.
A Trump Media representative directed a request for comment to a Monday news release that quoted Trump Media CEO and former U.S. Representative Devin Nunes.
“Closing out the 2023 financials related to the merger, Truth Social today has no debt and over $200 million in the bank, opening numerous possibilities for expanding and enhancing our platform,” Nunes said in a press release. “We intend to take full advantage of these opportunities to make Truth Social the quintessential free-speech platform for the American people.”
In the filing, the firm stated that it plans to run at a loss for the “foreseeable future” as it seeks to grow Truth Social’s user base and attract additional advertisers. It stated it would be “premature” to forecast when its operations will be profitable and generate positive cash flows. It stated that it would require bridge money of $5 million to $60 million.
According to the report, Trump Media had around $2.6 million in cash on hand at the end of 2023, with total liabilities of $70.1 million. The merger with shell business Digital World Acquisition Corp. a week ago resulted in an influx of approximately $300 million for the corporation.
Trump Media went public last week, giving the former president a paper net worth of almost $7 billion. However, Trump is prohibited from selling his firm shares for the next six months. Even before the new losses were announced, economists predicted that the company’s value would drop if Trump sold his shares.
“If he goes ahead [with selling], it could sink DJT by at least 15% to 40% based on option pricing,” said Ben Emons, senior portfolio manager and head of fixed income at NewEdge Wealth, in a report.
Analysts also foresee tumultuous market trading as the former president’s legal and political fortunes shift as he pursues a new term in the White House. John Rekenthaler, vice president of research at Morningstar Financial Services Group, compared the company’s shares to a cryptocurrency.
“As with bitcoin, people buy Trump Media not for future cash flows but because: 1) they expect its price to rise, and 2) they feel an affiliation for the asset,” Rekenthaler stated in a blog post. “Bitcoin owners are part of a group. Investors in Trump Media are considerably more concentrated. For them, DJT shares serve as a means of expressing their values and devotion.