Trump Media & Technology Group (DJT), the parent company of Donald Trump’s social media platform Truth Social, saw a decline of more than 21% on Monday after a successful launch last week.
The drop in stock value followed an updated regulatory filing on Monday morning, revealing significant losses and increased risks associated with the platform’s connection to the former president.
According to the filing, Trump Media reported sales of slightly over $4 million with net losses nearing $60 million for the year ending Dec. 31. The company anticipates ongoing losses due to profitability challenges.
“TMTG has a history of operating losses and negative cash flows from operations,” the filing stated.
“TMTG expects to continue facing operating losses and negative cash flows from operations in the foreseeable future as it strives to grow its user base, attract more platform partners, and advertisers.”
Truth Social has accumulated approximately 9 million users since its launch, with its success heavily reliant on the reputation and popularity of former President Donald Trump.
“TMTG may face higher risks compared to other social media platforms due to its offerings’ focus and President Trump’s involvement,” the company noted, highlighting risks such as advertiser harassment and criticism of Truth Social’s moderation practices.
“The value of TMTG’s brand could diminish if President Trump’s popularity declines.”
Notably, Trump Media disclosed its heavy reliance on advertising, with ad sales contributing significantly to its revenue.
“If we witness a decrease in users or user engagement, including the loss of high-profile content creators on Truth Social, advertisers may not find Truth Social appealing for their marketing investments, potentially reducing their spending with us and harming our business and financial performance,” the company cautioned.
The filing also revealed that stakeholders are subject to a six-month lockup period before being able to sell or transfer shares.
Trump holds approximately a 60% stake in Truth Social, valued at over $3 billion currently.
Cashing in on some of his stake in the company could benefit the former president as he faces a $454 million fraud penalty and deals with a campaign fundraising shortfall ahead of his 2024 election rematch against Biden.
The only exception to the lockup period would be if the company’s board decides to make a special allowance, which could potentially lead to lawsuits from public shareholders, experts told Yahoo Finance.
Trump Media went public on the Nasdaq after merging with special purpose acquisition company Digital World Acquisition Corp. in a deal approved by shareholders late last month.
The former president established Truth Social following his removal from major social media platforms like Facebook and Twitter, now known as X, after the Jan. 6 Capitol riots in 2021. Trump has since been reinstated on those platforms.
In the filing, Truth Social reiterated its mission of providing a platform for canceled content creators and a space for open global conversations without fear of censorship or cancellation based on political views.
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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