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Shares of Donald Trump\u2019s social media company rose about 16% in the first day of trading on the Nasdaq<\/a>, boosting the value of Trump\u2019s large stake in the company as well as the smaller holdings of fans who purchased shares as a show of support for the former president.<\/p>\n Trump Media & Technology Group Corp.\u00a0merged <\/a>Monday with a blank<\/a>\u2013check <\/a>company called Digital World Acquisition Corp. Trump Media, which runs\u00a0the social media platform Truth Social<\/a>, has now taken Digital World\u2019s place on the Nasdaq stock exchange.<\/p>\n Shares closed at $57.99, up 16.1%, giving the company a market value of $7.85 billion. At one point the stock was up about 59%. Trump\u00a0holds a nearly 60% ownership stake in the company<\/a>, now worth about $4.6 billion.<\/p>\n Many of those investing in Trump Media are small-time investors either trying to support Trump or aiming to cash in on the mania, instead of big institutional and professional investors. Those shareholders helped the stock of Digital World more than double this year in anticipation of the merger going through.<\/p>\n Truth Social\u00a0launched in February 2022<\/a>, one year after Trump was banned from major social platforms including Facebook<\/a> and X, formerly Twitter<\/a>, following the Jan. 6 insurrection at the U.S. Capitol. He\u2019s since been reinstated to both but has stuck with Truth Social.<\/p>\n On Truth Social Tuesday, users were posting about being shareholders or seeking tips on how to buy shares.<\/p>\n One user urged conservatives to \u201cget behind the DJT stock and sent it over $100 per share\u201d to \u201cdrive the liberals insane!\u201d Another declared: \u201cGet yourself a piece of #DJT stock if your a true MAGA supporter.\u201d<\/p>\n A day earlier, Trump Media CEO Devin Nunes, a former House Republican, said, \u201cAs a public company, we will passionately pursue our vision to build a movement to reclaim the Internet from Big Tech censors.\u201d<\/p>\n Despite the enthusiasm, investors could experience a bumpy ride. For one, they\u2019re betting on a company with uncertain prospects of turning a profit. Trump Media lost $49 million in the first nine months of last year, when it brought in just $3.4 million in revenue and had to pay $37.7 million in interest expenses.<\/p>\n In a recent regulatory filing, the company cited the high rate of failure for new social media platforms, as well as its expectation that its operations will lose \u201cfor the foreseeable future\u201d as risks for investors.<\/p>\n Research firm Similarweb estimates that Truth Social had roughly 5 million active mobile and web users in February. That\u2019s far below TikTok\u2019s more than 2 billion and Facebook\u2019s 3 billion \u2014 but still higher than other \u201calt-tech\u201d rivals like Parler.<\/p>\n However, Trump Media has said it doesn\u2019t keep track of some numbers that rivals use as key measures of their performance, such as average revenue per user or active user accounts. It says it wants to focus on the long-term instead of \u201cshort-term decision-making.\u201d<\/p>\n For that long term, though, skeptics see struggles ahead for a company that\u2019s estimated to have far fewer users than rivals in a business where gaining a critical mass is key.<\/p>\n \u201cI think there is a possibility of, sooner or later, the stock price falling by 95%,\u201d said Jay Ritter, a professor and expert on initial public offerings of stock at the University of Florida\u2019s Warrington College of Business.<\/p>\n Brian Dunn, director of the Institute for Compensation Studies at Cornell University, compared the fervor for Trump Media shares to the meme stock craze that boosted shares of companies such as GameStop<\/a> and AMC Entertainment to exorbitant heights in 2021.<\/p>\n \u201cLike any meme stock or fad, as long as there\u2019s a greater fool to buy you out for what you paid for it, than you can continue to prosper,\u201d Dunn said, warning that small investors \u201ccould end up holding the bag when the music stops.\u201d<\/p>\n On Monday, Trump told reporters that \u201cTruth Social is doing very well. It\u2019s hot as a pistol and doing great.\u201d On Tuesday, he posted \u201cI LOVE TRUTH SOCIAL, I LOVE THE TRUTH!,\u201d on the platform.<\/p>\n The company, which is based in Florida, said in a recent regulatory filing that it \u201cis highly dependent on the popularity and presence of President Trump.\u201d Trump Media has acknowledged that there are risks associated with Trump\u2019s outsized influence.<\/p>\n If the former president were to limit or discontinue his relationship with the company for any reason, including due to his campaign to regain the presidency, the company \u201cwould be significantly disadvantaged,\u201d it said in a filing ahead of the merger with Digital World.<\/p>\n Acknowledging Trump\u2019s\u00a0involvement in numerous legal proceedings<\/a>, the company noted that \u201can adverse outcome in one or more\u201d of the cases could negatively affect Trump Media and Truth Social.<\/p>\n Another risk, the company said, was that as a controlling stockholder, Trump would be entitled to vote his shares in his own interest, which may not always be in the interests of all the shareholders generally.<\/p>\n<\/div>\n\nSubscribe to the CFO Daily newsletter to keep up with the trends, issues, and executives shaping corporate finance. 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