As of the close of business today, the company which owns the Truth Social website, was selling on the NASDAQ exchange for $48.66 a share. A week ago, the stock closed at $78.40. Meanwhile, the entire NASDAQ stock index went from $16,298 on March 27th to $16,374 today.
I always compare the price of any stock which gets me interested to the index of all the stocks on that particular exchange. Now if the entire NASDAQ had dropped as much over the last week as Trump’s media company has declined, the NASDAQ index right now would be sitting at $10,104.
In other words, if every NASDAQ listed company were performing the way that Trump’s company is performing, the NASDAQ exchange would probably slam the door shut and say bye-bye to the entire investment community.
So, the real question we have to ask about the Trump media empire anchored by the Truth Social website is not whether it will become viable and succeed, but how long is it going to last.
Which happens to be what the accounting firm is saying which filed the Trump Media and Technology Group (TMTG) 8-K form today with the SEC.
Here’s what they said, in black and white right up front: “As discussed in Note 2 to the financial statements, the Company’s operating losses raise substantial doubt about its ability to continue as a going concern.”
Aside from the money coming in and the money going out, which I’ll detail below, I have to assume that the auditors who prepared this report also based their judgement about the company’s viability on TMTG’s description of its business: “The mission of TMTG is to end Big Tech's assault on free speech by opening up the Internet and giving people their voices back. TMTG operates Truth Social, a social media platform established as a safe harbor for free expression amid increasingly harsh censorship by Big Tech corporations.”
Both as an investor and previously as a financial consultant, I have probably read more than 500 financial reports issued by publicly owned companies. And the moment I see a company describing its ‘mission’ I know I’m probably dealing with nothing more than an overextended turd.
Missions are what military units go on when they shut down the bivouac and go into the field. Missions are what compassionate non-profits do with your tax-exempt donations. Missions are the trips my father took when the Department of Agriculture sent him to discuss food markets with farmers in New Zealand. Missions are when NASA sends some astronauts to the moon.
Businesses, or at least successful businesses, don’t worry about defining their mission. They worry about increasing income, cutting expenses, increasing profits, and seeing the price of their stock go up at least as fast as the index price of the stock exchange where their company is listed. Does the TMTG management team actually believe that there’s a single investor anywhere in the world who gives a rat’s damn about Big Tech’s ‘assault’ on free speech?
This is the kind of rhetoric used to make investors think that the big operating losses reported in the filing are to be expected given the company’s attempt to challenge Big Tech’s control of free speech over the internet. Except for the $16 million that the company spent on operations in 2023, less than 10% went to cover sales and marketing costs.
Sorry, but you don’t build a successful company which is totally revenue- dependent on customers purchasing advertising space when you spend 8% of all your operating costs on everything except getting on the phone, calling up potential customers and getting them to buy an ad.
I just looked at Facebook and scrolled down through the first 10 postings on my front page. One of the postings was a cute, little picture of the grandchild of someone who I friended on Facebook at some point time in time. The other nine postings were ads.
Now, Facebook is as committed to free speech as Truth Social, but the company is also committed to generating a shitload of money by aggressively selling advertising space. For the first 9 months of 2023, Facebook (now calling itself Meta) spent 15% of its operating costs on going after advertising, so here’s a mature, successful company spending twice the percentage of operating expenses that are being spent by a startup which is running out of cash.
No wonder the auditors who prepared this 8-K report are less than enthusiastic about whether Truth Social will be around in a few more months.
How about if Truth Social goes down the tube the night before the first Presidential debate? Of course, this assumes that Trump will even show up for a debate.
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