{"id":79313,"date":"2024-04-01T21:12:26","date_gmt":"2024-04-01T21:12:26","guid":{"rendered":"https:\/\/neclink.com\/index.php\/2024\/04\/01\/why-trumps-digital-media-company-is-different-from-other-money-losing-startups\/"},"modified":"2024-04-01T21:12:26","modified_gmt":"2024-04-01T21:12:26","slug":"why-trumps-digital-media-company-is-different-from-other-money-losing-startups","status":"publish","type":"post","link":"https:\/\/neclink.com\/index.php\/2024\/04\/01\/why-trumps-digital-media-company-is-different-from-other-money-losing-startups\/","title":{"rendered":"Why Trump&#8217;s digital media company is different from other money-losing startups"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div>\n<p id=\"speakable-summary\">Former president Donald Trump\u2019s digital media company is losing money, and lots of it. But why is that any different from other \u201cstartups,\u201d which often struggle to post a profit for years, if they ever do?<\/p>\n<p>There are a couple reasons.<\/p>\n<p>First, as a recap: Trump Media and Technology Group recently merged with Digital World Acquisition Company in a SPAC, the ill-starred financial instrument that, more often than not, represents a last-ditch option for a substantial cash infusion. The company is on the NASDAQ as, predictably,<a href=\"https:\/\/finance.yahoo.com\/quote\/DJT?.tsrc=fin-srch\"> $DJT<\/a>.<\/p>\n<p>An important part of going public is revealing your finances to all the world, and TMTG recently <a href=\"https:\/\/www.sec.gov\/ix?doc=\/Archives\/edgar\/data\/0001849635\/000114036124016719\/ef20025342_8k.htm\">filed its first quarterly financial report<\/a> with the SEC that everyone can look at and analyze. The financial press is having a field day, but the upshot is that TMTG is losing a lot of money and generating next to none. Specifically, the company lost $58 million on only $4 million in revenue.<\/p>\n<p>Those inclined to be charitable to a tech startup challenging entrenched rivals \u2014 regardless of its \u201cmission\u201d or leadership \u2014 may reasonably observe that this imbalance is common among early-stage companies with big ambitions. And so it is \u2014 who can forget that Uber operated with tremendous losses for years in order to undermine the taxi industry\u2019s business model?<\/p>\n<p>TMTG is superficially similar, primarily in that it doesn\u2019t make money. But that doesn\u2019t make it a startup on the verge of explosive growth. There are three big, straightforward reasons why:<\/p>\n<ul>\n<li><strong>TMTG isn\u2019t growing.<\/strong> Truth Social, the main business of TMTG, has failed to attract more than a few million users. It has not demonstrated the kind of traction any startup would need to show in order to suggest that it\u2019s the next big thing, or really anything at all (as others have pointed out, Twitter had $665M in yearly revenue when it IPO\u2019d). The incredibly low revenue numbers tell us that its only income source, advertisers, don\u2019t want to pay for what audience is there. And there\u2019s no real reason to expect this to change.<\/li>\n<li><strong>TMTG doesn\u2019t have VC runway.<\/strong> Venture capital is a high-risk, high-reward strategy where fundamentally unprofitable businesses are propped up until something changes and they can make money. This gives startups freedom to do risky things like overhire, charge too little, and kick the \u201cbusiness model\u201d can down the road, sometimes forever. If investors are confident, and the product has traction \u2014 like Uber \u2014 they will pour billions into it because they are confident that they will eventually make that back. But in his current precarious state, Trump would be a risky bet even for a VC. But that\u2019s all moot because:<\/li>\n<li><strong>TMTG is now accountable to its shareholders<\/strong>. Small startups may have to report to their VC masters now and then, but they have free rein compared with public companies, which have fiduciary duty to their shareholders. Though Trump is the largest TMTG shareholder at 60%, the other 40% are watching closely for any breach of this duty \u2014 such as a fire sale on shares, or a loan that drastically undervalues the company. But the important piece here is that TMTG doesn\u2019t have the freedom to throw cash around (they have none anyway) and take risks. The basic idea of going public is that you have a business that others want to share in \u2014 TMTG simply doesn\u2019t.<\/li>\n<\/ul>\n<p>The result is, as the analysts have already pointed out, that $DJT is fundamentally and wildly overvalued. The company is vanishingly unlikely to make a profit any time soon, let alone the kind of profit that would justify the share price and multi-billion-dollar valuation. Even the most optimistic scenarios probably envision solvency as a far-off goal.<\/p>\n<p>On the other hand, given the majority owner\u2019s personal, political, legal, and business woes, there is a very real risk that the whole thing will implode before the year is out.<\/p>\n<p>The fact of the matter is that the share price is completely unconnected to the performance of the company, rendering it essentially a \u201cmeme stock\u201d that will be priced arbitrarily and perhaps manipulated by public investors.<\/p>\n<p>While that may make a few day traders and short sellers money over the next few days and weeks, it\u2019s not the kind of thing that retains value long term, particularly with TMTG\u2019s lack of assets. By the time Trump is able to sell his shares, it\u2019s likely this company will be worth anything like what it supposedly is today. It\u2019s not even worth what it was this morning, with the stock down more than 20% since the market opened.<\/p>\n<\/p><\/div>\n<p><br \/>\n<br \/><a href=\"https:\/\/techcrunch.com\/2024\/04\/01\/why-trumps-digital-media-company-is-different-from-other-money-losing-startups\/\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Former president Donald Trump\u2019s digital media company is losing money, and lots of it. But why is that any different from other \u201cstartups,\u201d which often<\/p>\n","protected":false},"author":1,"featured_media":79314,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[149],"tags":[],"class_list":["post-79313","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/posts\/79313","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/comments?post=79313"}],"version-history":[{"count":0,"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/posts\/79313\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/media\/79314"}],"wp:attachment":[{"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/media?parent=79313"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/categories?post=79313"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/neclink.com\/index.php\/wp-json\/wp\/v2\/tags?post=79313"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}