Google the words Trump Media stock (NASDAQ:DJT), and you get 217 million results. Put them in quotation marks, and the number drops to 72,900, but it’s still significant. Investors, especially those on the right, can’t get enough of Trump Media stock.
As far as I’m concerned, this is a business built on sand and nothing else. However, as I write this, GuruFocus.com says Trump Media’s Altman Z-Score is 149.53, suggesting bankruptcy is a million miles away. I’ll take their word for it.
That’s primarily true because the company has no debt and over $200 million in cash on its balance sheet. However, if you look at the Altman Z-Score calculation, DJT has several marks against it. Retained earnings, EBIT (earnings before interest and taxes), and sales all come to mind.
The Altman Z-Score indicates the likelihood of a company entering bankruptcy proceedings in the next 24 months. I could definitely see Trump Media in this position.
Here’s Why.
Who’s Buying DJT Stock?
There have been many discussions about who is buying DJT stock.
Trump Media CEO Devin Nunes did say on Fox News that it had approximately 600,000 retail investors. InvestorPlace’s Samuel O’Brient noted in May 2023 that AMC Entertainment (NYSE:AMC), the ultimate meme stock, had one million retail investors, so it’s in the ballpark.
As for institutional investors, WhaleWisdom.com says ARC Global Investments II LLC, with 13.33 million shares, is the largest investor other than Donald Trump.
ARC is a company controlled by Patrick Orlando, the former CEO of Digital World Acquisition Corp., a SPAC (special purpose acquisition company) created to merge with Trump Media and go public. Not surprisingly, given the main character in this soap opera, it too is a cluster fudge.
It boggles the mind why any institutional investor would risk one’s reputation to invest in such a flawed business. Currently, the only people backing DJT are billionaires and meme-stock investors.
Twitter vs. Truth Social
When Twitter, now X, went public in November 2013, it had more than 215 million monthly active users (MAUs) and revenue of $422 million (nine months only). According to Axios reporting, Truth Social has one million monthly active app users in the U.S. and $3.4 million in revenue (also nine months).
Today, even with all that Elon Musk has done to destroy the social media platform, it still has 528 million monetizable MAUs. If even one-tenth of Truth Social’s MAUs are monetizable, I’d be surprised.
Axios lays out the negatives of Truth Social.
“Truth Social has yet to outline to investors its latest product plans or business strategy. The company has been plagued by business and legal challenges since it went public, including a now-settled SEC investigation and a lawsuit from former employees,” Axios contributor Sara Fischer wrote on March 27.
Fischer said that Twitter only made money in two out of eight years and was a public company. Say what you will about Jack Dorsey’s job running Twitter; he’s a hell of a lot smarter and more talented than Deven Nunes, Trump Media’s CEO.
Trump’s Bankruptcy History
The recent legal troubles faced by Donald Trump in 2024 got so bad at one point — he originally had to post a $464 million bond to appeal a civil fraud judgment but that was cut to $175 million — bankruptcy proceeding became a real possibility. However, with the value of his DJT stock shooting higher, that appears to be a non-starter.
The reality is that Trump’s business history is littered with the “b” word.
“Between 1991 and 2009, Trump’s companies filed for Chapter 11 bankruptcy six times. (On the 2016 campaign trail, the Queens-born real estate developer insisted this was evidence of his brilliance.),” wrote Vanity Fair contributor Bess Levin on March 21.
Interestingly, the last time Trump took a company public, in 1995—Trump Hotels and Casino Resorts—it entered bankruptcy proceedings less than 10 years later, in 2004. It never made an annual profit as a public company.
Yet, during those years, Trump pulled in $40 million in salary, bonuses, and options while putting his company into the red by $600 million and putting plenty of people out of work.
Here’s a suggestion for Donald Trump: Put your $200 million cash in the S&P 500 and call it a day. It’s the only way your business will avoid bankruptcy court.
That’s a given.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.