Trump-and-dump: Speculators bet on Truth Social 'meme' stock

Wednesday, 3 April 2024

Mohammed Al Shalloudi, a 21-year-old graduate data analyst in the United Arab Emirates who invested in Donald Trump's social media company, has little in common with the former US president's political supporters, reports Reuters.
Al Shalloudi bought shares in Trump Media and Technology Group (TMTG), but not because he believes in the business of its app Truth Social or because he is a Trump fan. He is part of an army of speculators seeking a quick lucrative trade whose bets on TMTG have made it one of the most overvalued and actively traded US stocks.
Al Shalloudi said he bought at $37 per share and cashed out late last week at $65 per share, clinching a 76 per cent return on his $4,000 investment in just a few days. TMTG's stock closed on Monday at $48.66 after listing on Nasdaq last week in a deal that valued it at just $10 per share.
"It was a no-brainer. You buy the stock, wait for Trump's fan base to hear about it, and enjoy your profit," Al Shalloudi said.
Reuters interviews with more than a dozen investors that posted about their positions on social media platforms such as Reddit and X found that most were looking to score a quick profit.
They bet that Trump supporters' fascination with the stock was untethering TMTG's stock price from the company's business fundamentals.
TMTG's current valuation of approximately $6.6 billion is equivalent to about 1,600 times the loss-making company's revenue in 2023 of $4.1 million, according to LSEG data.
No other US company of similar market capitalization has such a high valuation multiple, the LSEG data shows. This is despite TMTG warning investors in regulatory filings that its operational losses raise "substantial doubt" about its ability to remain in business.
The stock is also among the most actively traded, according to Trade Alert data. While social media posts indicate some Trump supporters have bought TMTG shares, a lot of the trading volume is coming from speculators looking for a quick flip.
"I invested $10,000 last Tuesday because MAGA is crazy and they will pump the stock," said Sarah, a 21-year-old software developer from Pennsylvania who asked for her last name not to be published. MAGA stands for Trump's campaign slogan, 'Make America Great Again'.
The appeal of TMTG to speculators helps explain the stock's volatility. The shares have risen as much as fivefold in the last two months and are currently valuing Trump's majority stake in the company at about $3.8 billion.