November 9, 2024 10:51 pm

Trump’s Social Media Stock Rebounds Sharply as Election Prospects Drive Investor Optimism

New York — Donald Trump’s social media enterprise, Trump Media & Technology Group (TMTG), is undergoing a significant revival on Wall Street as the 2024 U.S. presidential election looms ever closer. TMTG, the owner of Truth Social, a platform designed to cater to conservative audiences, has seen its stock price experience a substantial rebound, driven largely by Trump’s improving electoral prospects and a surge in political betting.

The company had faced a challenging year, with its stock price hitting a low point on September 23, 2024, when it dropped to $12.15, representing a staggering 82% decline from its peak. This crash had left many investors skeptical about the future of the company, which had not released any major product updates or strategic business developments that could explain the downturn.

Yet, in a surprising turnaround, TMTG’s stock has surged nearly 150% in the three weeks following that low point, with the price more than doubling. Just last week, the stock jumped nearly 50%, and by Monday, it had risen another 18%, making for a total increase of over 100% since late September. This dramatic recovery has sparked considerable interest and speculation within financial markets.

Unlike typical stock rallies, which are often triggered by a company’s improved financial performance or new product launches, the driving force behind TMTG’s resurgence seems to be directly linked to the political fortunes of its founder, Donald Trump. As the 2024 presidential election nears, many traders see the stock as a way to place bets on Trump’s chances of returning to the White House. The closer Trump gets to victory in the election, the more favorable the outlook for TMTG becomes.

Matthew Tuttle, CEO of Tuttle Capital Management, explained the correlation: “It’s really straightforward—investors are betting on Trump’s election success. If he wins, the stock has significant upside potential. If he loses, there’s a strong likelihood the stock will plummet, possibly to zero.”

TMTG’s fortunes are closely tied to Trump, who remains the company’s largest shareholder with 114.75 million shares. As the dominant user of Truth Social, Trump is the face of the platform, and his personal stake in the company has risen dramatically alongside the stock price. Since September 23, the value of his holdings has increased by an estimated $1.7 billion, pushing his total stake to $3.4 billion.

Jay Ritter, a finance professor at the University of Florida with extensive experience in capital markets, described the stock’s rebound as “astonishing,” though he noted that much of the rally is driven by speculation rather than any fundamental business change. “This stock thrives on attention, and it’s clearly benefiting from the political betting markets. Right now, investors are reacting to polling data that suggests Trump’s chances are improving.”

Indeed, betting platforms like PredictIt have shown a significant shift in the election odds, with the gap between Trump and Vice President Kamala Harris narrowing considerably in recent weeks. The narrowing race has fueled speculation, driving up TMTG’s stock price, as investors attempt to capitalize on the uncertainty of the upcoming election.

Michael Block, co-founder and chief operating officer at AgentSmyth, highlighted the surge in bullish options activity targeting the weeks immediately following the election. “We’re seeing a lot of call options expiring just after the election, which indicates that traders are making concentrated bets on a Trump victory,” Block said. “The stock’s recent surge reflects this sentiment.”

Despite the recent rally, TMTG’s stock price remains well below its March 2024 high of $66, and the value of Trump’s holdings is still down by approximately $2 billion from its earlier peak. However, the momentum gained in the last few weeks has revitalized the company’s stock, offering hope to investors who had previously written it off.

A key factor supporting TMTG’s stock price is Trump’s decision to hold onto his shares. Many investors feared that when the lock-up period preventing insiders from selling their stock ended, Trump might offload his holdings, sending the stock into a tailspin. However, Trump has publicly stated that he has no intention of selling, and he has not disclosed any sales to date. This has provided a degree of stability and confidence for traders, who now believe that Trump is committed to the company for the long term.

“If Trump had sold or indicated that he was planning to sell, we wouldn’t have seen the kind of rally we’ve had,” Tuttle added. “His decision to hold onto his shares signals to the market that he’s confident in both his political future and the company’s prospects.”

While the recent stock surge has been remarkable, not all experts are convinced that the momentum is sustainable. Ritter and other financial analysts remain skeptical, warning that TMTG’s valuation is heavily inflated. With no clear business model or path to profitability, they caution that the stock could be overvalued by a substantial margin.

“At its current price of around $25, TMTG is trading at a level that is significantly above what its actual financials would support,” Ritter said. “Without a solid business plan or a way to generate consistent revenue, the stock could see a major correction, with the potential for a 90% decline if Trump loses the election or if the company doesn’t develop a sustainable business model.”

As the election approaches, TMTG’s stock will continue to reflect the shifting dynamics of the race, with each new poll or political development impacting its price. For now, investors are betting heavily on a Trump victory, but the stock’s future remains highly uncertain, closely tied to the outcome of one of the most unpredictable elections in recent U.S. history.