Bill Priano/Getty Images
Former President Donald Trump delivers the keynote address at Turning Point Action’s People’s Convention in Detroit, Michigan on June 15, 2024.
new york
CNN
—
Reid Hoffman knows firsthand that wealth can be made by building a social media empire, but the LinkedIn co-founder is stunned by the size of former President Donald Trump’s social media holdings.
Trump Media & Technology Group, the owner of President Trump’s conservative social media company, Truth Social, is valued at a whopping $6 billion on Wall Street, despite a recent plunge in its stock price.
“These are incredibly high numbers,” Hoffman, a Biden donor who is now a Microsoft board member and venture capital investor, told CNN. “Truth Social’s numbers are way outside the realm of business as usual.”
Trump Media (DJT) shares soared more than 20% on Monday, marking their second-best day since the stock began trading on the Nasdaq in late March.
Unlike the social media site LinkedIn, which inked a deal to sell to Microsoft in 2016 for $26 billion, Trump Media generates little revenue and remains a tiny player in the industry.
Truth Social has a much smaller user base than Reddit, Elon Musk’s X (formerly Twitter), or even Instagram’s Threads.
In 2023, Trump Media’s revenue was just $4.1 million, meaning Wall Street is assigning it an astronomical price-to-sales multiple of over 1,400 based on past earnings.
By comparison, Wall Street values social media leader Meta Platforms, which owns Facebook and Instagram, at just nine times its all-time earnings.
Hoffman, a vocal critic of President Trump, noted that if Meta boasted a price-to-sales multiple like Trump Media, the company’s market capitalization would be more than $150 billion (its current market capitalization is $1.3 trillion).
“Trump Media is probably worth closer to $40 million rather than billions,” Hoffman said. “Truth Social has wasted hundreds of millions of dollars without any real results in user engagement, growth or potential revenue.”
Trump Media did not respond to CNN’s request for comment.
View this interactive content on CNN.com
Trump Media’s stock price began to plummet after May 30, when Trump, the company’s chairman and largest shareholder, was convicted of 34 felony counts in a hush-money trial. The company’s market capitalization halved between May 30 and last week, but recovered on Monday.
Trump Media said in an SEC filing Monday that it expects to realize more than $69 million in proceeds from investors exercising warrants to purchase common stock.
Hoffman is not the first to express disbelief about Trump Media’s valuation.
Some experts have called Trump Media a “meme stock” like GameStop or AMC (meme stocks typically trade based on hype and social media sentiment rather than fundamentals).
Jay Ritter, a University of Florida finance professor who has studied capital markets for 40 years, told CNN last week that Trump Media’s stock prices remain “very expensive.”
Barry Diller, a billionaire media mogul who sits on the boards of Expedia, Coca-Cola and MGM Resorts International, told CNBC that Trump Media is a “scam” and that people who buy its stock are “idiots.”
But the market has consistently valued Trump Media at billions of dollars.
The lofty valuation has boosted the net worth of Trump, the company’s largest shareholder.
Based on Monday’s stock prices, Trump’s 114.75 million shares in Trump Media are worth nearly $4 billion, down from $6 billion on May 30 but up from $3 billion at the end of last week.
Hoffman has a few theories about why some investors “continue to hold onto stocks despite very obvious flaws in the underlying business.”
He told CNN that Trump Media’s stock price is likely supported by “gullible funds from day traders who personally support Trump” and “bets that Trump will win the White House and that the stock price will skyrocket.”
Indeed, analysts previously told CNN that Trump Media has become a vehicle for betting on President Trump’s political fortunes, with Truth Social potentially becoming the president’s primary communications platform by early next year.
Hoffman speculated that “those with deep pockets,” such as wealthy individuals and governments, own shares in Trump Media, “artificially propping up” the value of Trump’s holdings.
