Chapter 1: Understanding TMTG's Financial Landscape

Evaluating the worth of Trump Media and Technology Group (TMTG) leads to a rather disheartening conclusion.

The financial statements from the merger between Digital World Acquisition Corporation (DWAC) and TMTG reveal some startling insights. You can review the pro-forma financials here as filed with the SEC: 424B4 (sec.gov).

The key section to consider is the Pro Forma Combined column, which assumes minimal share redemptions. As of September 30, 2023, the company has not yet filed year-end financials. Recent discussions have suggested TMTG might go public with outrageous valuations, estimated between $5.0 billion and $5.8 billion. This figure is calculated based on DWAC's share price multiplied by the anticipated number of shares outstanding at closing. For instance, DWAC was trading at $40.60 on March 25, 2024, leading to a market cap of approximately $5.5 billion when calculated with 135,454,094 shares.

However, this valuation is questionable, as it equates the current DWAC share price with its outstanding shares, which is misleading. Before merging, DWAC had total assets of $310,482,000, with $307,196,000 in cash held in trust and a negative shareholders' equity of -$59,466,000. If this cash were divided among shareholders, it would only equate to about $8.26 per share, especially considering the absence of any revenue and a loss of -$20,006,000 over nine months.

In contrast, TMTG did possess some business operations. So, what does DWAC receive from the merger that could justify a $5.5 billion market cap? TMTG has $2,911,000 in assets, $57,167,000 in debt (to be converted into stock post-merger), a negative net worth of -$57,584,000, and has reported a meager revenue of $3,380,000 over the same nine-month period, incurring losses of -$49,011,000.

The anticipated merger might lead to the issuance of an additional 98,303,238 shares. However, the combined assets will total only $295,371,000, primarily consisting of $294,299,000 in cash from DWAC. The estimated number of shares post-merger is 135,454,094, and each share is assumed to have a value of $10.00, despite market fluctuations. Consequently, total assets per share will be approximately $2.18, with cash per share around $2.17. Furthermore, an additional 40,000,000 shares of "earn out" stock may also be allocated to former TMTG shareholders shortly after going public.

This implies significant dilution for investors. Now, let’s delve into TMTG's business performance. In its third year, TMTG generated a mere $3,380,000 in revenue for the nine months ending September 30, 2023, indicating an annualized revenue of about $4.5 million. Losses during this period exceeded -$49 million. While there was some growth, the first year of operations in 2021 saw zero revenue, with an operating loss of -$6,378,700. The revenue in 2022 improved to $1,470,500, but losses increased to -$23,247,300. In 2023, revenue reached $3,380,000, reflecting a minor improvement in losses to -$10,648,700 for nine months and -$14,198,267 annualized.

Even now, Truth Social, TMTG's main platform, has only 2 million active users, generating approximately $1.1–1.2 million in revenue per quarter, while still incurring substantial losses. This begs the question: how can TMTG be valued at $5.5 billion?

Valuation metrics illustrate a significantly overvalued stock. Should the valuation be accurate at $5.5 billion, the Price/Revenue ratio would soar to an astonishing 1,222x revenue. With Truth Social attracting around 2 million active users, in stark contrast, Twitter/X boasts over 500 million users and is valued at roughly $12.5 billion, making it 2.27 times more valuable than TMTG despite having 250 times the user base and around 1,000 times the revenue.

It’s imperative for potential investors to critically evaluate this company’s market limitations and the track record of its management, which has been marred by past failures. After reviewing the numerous risk factors in the prospectus linked above, if you still feel compelled to invest, consider this alternative: take the funds you intended to use for this stock, place them atop a pile of MAGA hats in your backyard, stand back, and light them on fire. At least this way, you won’t feel like a fool when the "Trump magic" inevitably impacts your finances.

Chapter 2: The Future of TMTG and Market Dynamics

The first video discusses the staggering valuation of Trump’s media company, now pegged at $8 billion. It explores the implications of this valuation on investors and the market.

The second video explains the decline of Donald Trump's media empire as stock prices plunge by 72%, resulting in substantial losses in net worth.