There’s a new publicly traded social media company available to investors as of this week; On Monday Trump Media & Technology Group (NASDAQ: DJT) completed its merger with Digital World Acquisition Corp — a so-called blank check company and special purpose acquisition company (SPAC) designed for the sole purpose of streamlining the process of taking a merger target public.

Let’s call it TMTG for short, best known as the parent company of Donald Trump’s social media network, Truth Social.

Side note: For more on the nuance of SPAC mergers — including risks, SPAC structures, PIPE funding, and comparisons to more traditional methods of going public — check out some previous research I published with my former colleague Simon Erickson of 7investing here, here, and here.

TMTG’s mission? “[T]o end Big Tech’s assault on free speech by opening up the Internet and giving people their voices back.” The company goes on to describe Truth Social as “a social media platform established as a safe harbor for free expression amid increasingly harsh censorship by Big Tech Corporations.”

That’s a not-so-subtle dig at Meta (NASDAQ: META), the parent company Facebook and Instagram, as well as the now-private X (previously Twitter), both of which previously banned Trump from their platforms over his online behavior during the events of Jan. 6, 2021. It’s worth noting both Meta and X have also since reinstated Trump’s accounts, though Trump himself has understandably resisted resuming activity on the competing platforms.

Trading under its new symbol, “DJT,” TMTG initially soared almost 60% in its first day of trading on Tuesday before settling to close up 16% in the regular trading session.

That raises the question: Putting politics aside, is the business of Truth Social a worthy portfolio candidate?

From a purely objective, analytical standpoint, I don’t think so.

TMTG’s current market capitalization stands at almost $6.6 billion (with a “b”) as of Tuesday’s close — an exhorbitant premium for a company with only 8.9 million signed-up users (and less than half a million estimated monthly active users as of February) that generated revenue of only $3.4 million (with an “m”) over the first three quarters of 2023. TMTG incurred a net loss of $49 million over the same period. This SPAC merger will infuse Truth Social with around $300 million in cash, buying it several quarters of runway even if its losses persist.

For perspective, shares of social news aggregation giant Reddit are valued at around $10.4 billion as of today after going public at a roughly $6.4 billion valuation earlier this week — despite generating $804 million in revenue last year. X has more than 368 million monthly active users worldwide after being acquired at a (likely inflated) price of $44 billion by Elon Musk in late 2022, while Meta’s four platforms (Facebook, Instagram, Whatsapp, and Messenger) boasted an incredible 3.98 billion monthly active users at the end of 2023 (Meta’s market cap was $1.26 trillion as of Tuesday’s close). Still, at the peak on Tuesday Truth Social was valied at more than $1,000 per signed-up user, compared to $147 per user at Reddit and $80 at X.

Worse yet, Truth Social’s usage appears to be declining. The company hasn’t specifically disclosed its exact number of monthly active users to investors as of this writing — a concerning omission, to say the least — but Similarweb statistics estimate those MAUs declined by more than 50% year over year last month.

If those trends hold…ahem…true…then they also negate the fact that Truth Social stands much earlier in its long-term growth trajectory than the rest of the world’s social media juggernauts.

In the end, TMTG might well sustain its exhorbitant valuation should Trump emerge victorious in this year’s U.S. Presidential Election — while simultaneously running the risk of absolutely collapsing if he’s defeated. But I think investors would do well to avoid the stock, at least until the underlying business shows more tangible progress toward actually growing revenue and its active user base while narrowing its losses.

For now I’m perfectly content watching Truth Social’s story play out from the sidelines.

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