Shares Of Trump Media Surge as US Election Nears

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Shares Of Trump Media Surge as Election Nears

Trump Media & Technology Group Corp (DJT) stock witnessed a significant jump on October 28, 2024, as betting odds favored the reelection of former US President Donald Trump. With Trump Media shares surging 20%, per a Reuters report, the value of the former president’s stake in the company surpassed $5 billion. The rally resulted in the stock recording the highest closing price since May 31, 2024. 

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Factors Driving the Surge in Trump Media Shares Price

With only a few days to go until the election, betting odds indicate expectations that Trump will emerge victorious on November 5, 2024, beating Democratic candidate Kamala Harris. According to Polymarket, an election betting platform, Trump has a 66% chance of winning, which marks a significant jump from 48%, predicted a month before. 

The PredictIt platform also indicates that Trump has a better chance than the current US vice president. With DJT making the list of the top stock gainers, it is evident that traders are in line with these predictions, betting on Donald Trump to retake the White House.

Another key factor influencing the Trump Media shares’ performance is the speculators implementing momentum trading strategies. They are buying Trump Media shares as the price rises, thus pushing the stock price even higher. Simply put, these market participants are purely relying on the momentum connected to the former president’s political fortunes, not the stock’s underlying fundamentals. In essence, DJT stock is now a reflection of what traders think about the result of the November 5 election.

On October 29, 2024, approximately 165 million DJT shares changed hands, which is 4 times the past month’s average trading volume for this stock. The increased activity indicates the growing speculation and interest regarding the Trump media shares among market participants. 

Donald Trump pledged not to offload his stake in the company. This is another key factor that played a crucial role in the increase in share price.

Implications of the Surge in Trump Media Shares Price

On account of Trump Media shares’ performance, the market valuation of DJT surpassed that of X (formerly known as Twitter). However, Elon Musk’s platform boasts a significantly larger network when compared to Truth Social, the product of Trump Media. 

Per Jay Ritter, a finance professor at the University of Florida, the higher the Trump Media shares price surges, the greater the downside potential. This is because the company has weak fundamentals with close to no revenue. 

In August 2024, Trump Media reported a net loss worth $16.4 million for the quarter ending in June 2024, and its revenue for the second quarter was only $837,000. The lackluster financials suggest that this stock is a meme stock. The fundamentals can in no way justify its market value of more than $9 billion.

Per Ritter, the limited growth potential discourages institutional investors, and the company’s current financial position is an indication of a long-term downtrend. 

Taking into account that the stock’s rally is closely tracking the former president's odds and the poor fundamentals, a loss to Kamala Harris could significantly impact the stock. In fact, Gene Munster, the co-founder and managing partner of Deepwater Asset Management, thinks that the shares would free fall given the link with the former president. Hence, traders might want to proceed with extreme caution. 

Having said that, if Trump wins the election, the company’s prospects can improve significantly as Truth Social might become a crucial platform for presidential communications. 

What Are Analysts Saying?

According to industry analysts, Trump Media shares’ performance is similar to classic meme stocks. As one can observe, social sentiment is driving Trump Media shares price, resulting in a speculative trading frenzy. Some experts and analysts believe that the stock’s valuation of 1600 times enterprise value defies logic as market participants are trading the stock with their hearts, not their heads. 

According to Steve Sosnick, the chief strategist of Interactive Brokers, the line between gambling and trading is becoming increasingly blurred. Some investment research firms, for example, S3 Partners, are of the opinion that the stock might become worthless if Trump fails to win the 2024 election. However, according to S3 Partners, short sellers could incur substantial losses in case Trump wins. 

About Trump Media and Technology Group Corp.

Headquartered in Sarasota, Florida, Trump Media & Technology Group Corp operates Truth Social, a social media platform that opposes censorship and promotes free speech. Former US President Donald J. Trump is the company’s largest shareholder, owning over 57% of the shares. Trump Media shares debuted on the NASDAQ in March 2024.