Valuation Justifies Itself - Truth Social ($DJT)

I want to talk about Donald Trump, and how his app Truth Social could beat… just about everybody.

If you’re touchy about politics, don’t worry. We’ve been away a while, but this is still a newsletter about business, not politics. And an explanation for the long hiatus? My job pays me, you guys don’t. Nuff said.

Now, Truth Social.

It’s Twitter (with even more groupthink)

If you haven’t heard about Truth Social, I’d describe it as Twitter (X?) where everyone thinks like Donald Trump.

And that’s no accident.

Two former “Apprentice” contestants were instrumental in founding the app, which they pitched to Big Don as his answer to bans on mainstream sites like Facebook and Twitter.

(Full disclosure: I worked on the News team at Facebook when the Trump ban was implemented. And, I have a Twitter account which no one follows.)

Truth Social’s thesis is simple:

Donald Trump is the most famous person in the world. People who love him really love him. Therefore, they’ll be loyal customers. And we can monetize that.

If you’ve read my other one pagers, you know this is where I usually explain why I think the whole thing will or won’t work.

But this is not a normal business. Devin Nunes is the CEO. Under DJT he investigated the FBI and got a Medal of Freedom from Trump in return. These guys make Elon look grounded by comparison.

“Come on Devin, you got this. Act like you know what a chair is.”

This is a Trump vehicle, designed to serve Trump’s interests. The stock ticker is literally “DJT”. None of this is a secret.

We could talk about the death of “unified” online culture, and how curated experiences like Truth Social might be more compelling than monstrous unitary blobs like Facebook or Twitter. Maybe.

But I don’t want to talk about that. I want to talk about price.

A Madman’s Game (Technical and Fundamental Analysis of a Trump Meme Stock)

People say Truth Social’s ticker “DJT” functions as a barometer for Trump and his candidacy.

For example: Trump was found guilty in his NY hush money case on May 30th. Since then, the stock is down, a lot. From ~$52 to $37 dollars per share.

I highlighted the important parts since I know TikTok has rotted most of our brains beyond any hope of basic pattern recognition.

You may also have noticed that the price-to-earnings (P/E) ratio is blank. That’s because…Truth Social isn’t making a profit.

Specifically, in their Q1 earnings the company reported a $327MM loss against $700,000 in revenue. Now I double checked the decimals. That’s not 700 million in revenue. That’s seven hundred thousand. With three hundred million in losses.

In fairness, maybe future quarters will be better. But, it’s also fair to note the company’s 10Q statements are unaudited…because their auditor was banned for life due to fraud.

Not great.

Through it all though, zoom out, and DJT’s share price has actually been relatively stable.

That’s because this stock doesn’t just have “investors”, it has fans. People who like Trump buy, no matter what. You can hate that phenomenon, or you can love it, but it has a very real effect on share price.

So let’s look at what’s real: Users, and valuation.

Valuation: From Trump to Musk and Back Again

We all joke about Facebook being for geriatrics, but across their platforms Meta still has close to 3.24 billion daily average users. Snapchat sits at 414 million, Twitter 368 million, and Reddit 73 million. Truth Social recently reported a total of…2 million daily average users.

That’s not much. But there’s more to a company than just its gross user base. Let’s look at market cap per user.

Across our sample, Meta has by far the highest market cap ($1.27 trillion, not bad) Truth Social has the lowest, and the rest are in the middle. But what might surprise you is the market assigns Truth social a total valuation per user of $3,720. For the others that number is… much lower.

I made all the bars their respective corporate colors. Including DJT as Trumpian orange

(Note: Twitter users and valuation as of 2022 Musk acquisition)

I know what you’re thinking. “Luke, that’s not the market valuing Truth Social’s platform. That ludicrous valuation is a product of political mania.”

And of course you’re right. After all, you read The Weekly One Pager. But it’s true, DJT is likely only valued so highly due to ravenous supporters bidding up price and creating a premium that otherwise wouldn’t exist.

But say whatever you want about Donald J Trump, you have to respect a juicy valuation. And to prove why. I’m gonna tell you a story.

Wisdom (from the mouths of bankers)

During my MBA oh, a year and a half ago, I attended a stock pitching event. During the mixer afterwards I spotted an alumni judge standing alone. This guy worked at Goldman Sachs and no one had bothered to say hello. I guess everyone was intimidated? That’s how you know I went to a non-target school.

Being the obnoxious interloper I am, I walked up and probably said something stupid. And then I kept talking. Anyway we had a long chat, and at some point he asked me:

Do you know the secret to Amazon’s success?

I guessed. Logistics. Technology. Vision. No, no, and no. He posed the question another way. UPS, DHL, any big delivery company could’ve built their own Amazon. They had the manpower, the infrastructure. So why didn’t they?

My Goldman guru explained that when Jeff Bezos started Amazon, he was building and selling a dream. He had connections, and people believed in his story. So they bought it. And they kept buying it. Bidding up the price. Buying new issuances. And supporting astronomical valuations. Meanwhile, to satisfy their investors, UPS had to actually meet its quarterly goals and “make a profit”.

Amazon had the market on its side. So it got a high valuation. Cheap access to capital. And a long, long runway to profitability. The competition hardly had a chance. After all, how do you compete against free money?

Don’t misunderstand me. I’m not saying DJT is the next AMZN. Far from it. But what I am saying is from Amazon, to Tesla, there is a long tradition in taking mania and wild valuations and turning them into strong, stable, and very real businesses. If you’ve got a crowd behind you, everything gets easier.

After all, if it can get you the Presidency, why not everything else?

Until next time. This has been,

The Weekly One Pager

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PS – Thank you very much for reading. For those of you who’ve been subscribed for a while, welcome back! I know it’s been a long hiatus. And if this is your first Weekly One Pager, ignore everything I just said. I definitely publish this newsletter regularly on a predictable, weekly basis as the name suggests.

In all seriousness, I really have always intended to write this thing just about once a week. The name was an aspiration, and ideally not an intentional lie. But somehow I look down and the last time I published was all the way back in December 2023! Which I think means I was “on break” almost longer than I was ever writing this thing. My only excuse is that during the last six months, my day job has been working me about as hard as I’ve ever been worked. And that includes back during my stint in network news when I was 100% nocturnal working the night shift from midnight until 9am. Yes, the last six months have been harder than that.

But there’s no such thing as a good excuse. So I promise, I will make this project a priority going forward, and do my best to deliver on what I sold you guys when you subscribed. One company. Once a week. One thousand words or less.

And I reiterate my little slogan for this newsletter because strangely enough, many of you might not have heard it before. What I mean by that is, there’s a whole lot more of you here than there were the last time I wrote this thing. Since my last post, more than 70 people have subscribed to the Weekly One Pager. Which is wild. Not only because there are now more than 200 of you guys. But also because I have to grapple with the fact that some of the most successful months of this newsletter’s life have been…when I have not written a single word.

All this just proves my theory: the best newsletter is the one that never emails you.

I’m joking of course. Kind of.

The point is, I am very excited to have you all on board. I love the chance to entertain and inform (and irritate) a whole new audience of people who don’t know what I’m all about. So thank you for being here. Thank you for subscribing. Thank you for reading. And if you feel the urge to, thank you for sharing this crazy little project with a friend or coworker you think might enjoy it.

Hoping to see you again in less than six months,

Luke McGinty