How Much Is Donald Trump's Truth Social Really Worth

Forbes

Is Trump’s Twitter knockoff really worth billions? Forbes money in politics reporter Kyle Mullins joins "Forbes Talks" to share a few ways to look at it.  Read the full story on Forbes: https://www.forbes.com/sites/kylemullins/2024/04/06/how-much-is-truth-social-really-worth/  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00 Hi, everybody. I'm Brittany Lewis with Forbes Breaking News. Joining me now is my Forbes

00:07 colleague, Money in Politics reporter Kyle Mullins. Kyle, thanks so much for joining

00:11 me.

00:12 Always great to be here, Brittany.

00:14 The day Donald Trump's Twitter-esque social media platform Truth Social went public, the

00:19 billionaire former president's net worth more than doubled. But Forbes also reported that

00:24 Truth Social brought in $4.6 million in revenue over the past year, which is less than half

00:31 of an average neighborhood cheesecake factory. So is this a valuable company?

00:36 Listen, Brittany, we've talked about it before. I'm not going to knock the cheesecake factory,

00:43 but when it comes to Truth Social, it really depends on how you look at it. On the one

00:49 hand, Forbes uses the public valuation of the company, the stock price and its market

00:53 capitalization when we're considering how to value it for someone's fortune. That's

00:57 what we've been doing for decades. That's what we do for all the other billionaires.

01:00 We're going to do it for Donald Trump as well. And according to that valuation, his shares

01:08 in that company, which is over half the company, were worth billions and billions of dollars.

01:14 And the company itself had a market capitalization of over $5 billion. With all of that said,

01:21 I think there was some evidence that this was a meme stock. I think we'll talk about

01:25 that a little bit. And I so I wanted to dig into what are some other ways of thinking

01:30 about how we can go about valuing this company? How can we figure out other ways of looking

01:36 at it beyond just the market capitalization?

01:39 And you found three ways to value the company. But before we get there, you did mention that

01:44 this looks like it could be a meme stock. What does that mean?

01:49 Yeah, so a meme stock is basically the idea that there are every once in a while there's

01:54 a stock and its value is just wildly divorced. Like not even like a little bit divorced,

01:59 but wildly divorced from the fundamental financials on the ground.

02:05 I'll give you an example. We had GameStop and AMC. Those were two well-known meme stocks

02:11 a couple of years ago. And they all of a sudden, they just start skyrocketing because a group

02:18 of very active traders, retail traders on Reddit, decided they were going to push these

02:23 stocks to the moon. And I mean, the prices went up 10, 20, 30x. I mean, it was enormous.

02:29 And nothing had really changed with GameStop's business or AMC Theater's business that had

02:35 caused their valuation to go up by 10, 20x. It was just that people had decided that they

02:40 were going to push the stock price up. And that's what they did.

02:42 The stock prices, like you're saying, are pushed to the moon. And then what happens?

02:48 What usually is their fate? And we can look back at either GameStop and/or AMC.

02:52 Yeah, GameStop and AMC both fell pretty dramatically from their all-time highs. GameStop fell back

03:00 almost all the way to its sort of pre-meme stock level, if I remember correctly. Not

03:05 quite all the way, but almost all the way. AMC has fallen most of the way, but not, you

03:11 know, the meme stock has come off. But AMC Theater's has done significantly better than

03:14 GameStop. And so it actually didn't, like, the stock price didn't collapse completely.

03:19 But that kind of brings us back to the idea that the stock price should be a reflection

03:22 of the financial fundamentals of the company. And, you know, most of the time we're talking

03:27 about stocks. When we're talking about stocks, we talk about price to share ratios, that

03:32 kind of thing. A lot of tech companies will trade between 5 and 10, you know, at a multiple

03:38 of 5 to 10. And Truth Social is trading at over 1200. So at least it was as of last week.

03:44 So that's that's the kind of sort of wild gap between financial reality and the stock

03:51 price on the market that we're talking about.

03:54 So Truth Social has been public since late last month. How are the shares of the social

03:59 media company doing now as we sit here a few weeks after they were pushed to the moon?

04:04 So, yeah, a couple of weeks ago, late March, the company went public or excuse me, it completed

04:10 a merger. It didn't have an IPO, but it did go public via a SPAC merger. And I mean, it

04:16 reached a high of around eighty dollars a share on its first day of trading. And then

04:21 it fell back down a little bit. It closed a little bit lower than that. It's down to

04:24 below forty dollars a share today. So we're talking about a more than 50 percent drop

04:28 from its all time high for for this for the stock.

04:32 And how much are the former president Donald Trump's shares worth in the company?

04:37 Has a little less than seventy nine million shares in the company. That's over half the

04:43 company, like I said. And those are worth a little under three billion dollars today.

04:48 If you take today's stock price.

04:51 And so people are pushing, as you said, this stock price up. So if he sells his shares

04:56 and we talked about this before that he has a six month lockup agreement, he can't sell

05:01 them before. But let's say he sells them after six months. What does the price of this stock

05:06 look like?

05:08 Almost mechanically, if you're talking about an investor who owns over half of the company

05:13 and they start selling shares, especially if they start selling a lot of shares, the

05:17 stock price is going to decline and it's probably going to decline. But that said, even if Trump

05:23 indicates that he might sell some shares that could drive the price down before that six

05:26 month lockup agreement ends. And even if he doesn't indicate that he's going to sell anything

05:31 and even if he doesn't sell a dime, I given what has happened to the stock just over the

05:36 past couple of weeks, I wouldn't bet on its value being particularly high, certainly anywhere

05:41 near its current value in six months. Anything could happen. This is Donald Trump we're talking

05:46 about, but I wouldn't bet on it.

05:49 So let's now talk about Truth Social's current value and how much it might be worth. You

05:54 came up with three different ways to figure out its value. So let's first, what's the

05:58 market value and how did you arrive at this number?

06:01 Yeah, so this reporting is of last week and the late last week. The market value, market

06:06 capitalization at that point was a little over five billion dollars, about 5.2 billion.

06:12 And I mean, that one is very simple. You know, we use that price, we use that value in our

06:17 value, in our valuations, because that's what real people are saying the stock is worth.

06:21 They are actually buying and selling the stock for that much. And so there's no really that's

06:25 the purest expression of how much something is worth, how much it can be purchased for.

06:29 So about five point two billion dollars as of last week. It's fallen a little bit since

06:33 then.

06:34 So then you found the transaction value of the company. So walk us through how you found

06:38 this different number.

06:41 So before the company went public, completed its merger, its back merger in March, the

06:49 group of investors, institutional investors, and these are people who are not retail traders,

06:54 not big, not necessarily really big MAGA fans, that kind of thing. But they're just institutional

06:59 investors. They're looking to make money, you know, first and foremost. They might be

07:03 Trump fans. That's separate. You know, might be separate from their moneymaking instincts.

07:07 They bought into the company and they bought into the company at about an 85 percent discount

07:12 relative to what the shares were operating at that point.

07:16 Now, obviously, there's been some intervening events. The stock went public, for example.

07:21 But you know, the 800 million, that valuation, if you apply that discount today, would come

07:27 out to about 800 million dollars. That's a far cry from, you know, the five point two

07:32 billion that was the market capitalization was suggesting. Five point two billion is,

07:36 you know, how much Macy's is worth, how much Planet Fitness is worth, how much Alaska Airlines

07:40 is worth. You know, these are like proper big midsize companies. Eight hundred million

07:44 dollars is not a proper midsize company valuation. But, you know, still a respectable business.

07:50 Eight hundred million is nothing to sneeze at.

07:54 Nothing to sneeze at. It's also not a cheesecake factory, as you and I have discussed. I like

07:58 that point of reference. But we've got over five billion dollars. We've got eight hundred

08:03 million dollars. And you found at its lowest it could be worth anywhere between 40 million

08:08 and 90 million dollars. How did you come up with that range?

08:13 So this was kind of a back of the envelope way of trying to look at the company, really

08:17 drill down on its fundamentals. And to do that, we use comparisons to other companies.

08:23 The best comparison is Twitter. Truth Social is to some extent a clone of Twitter, or at

08:28 least a bit of a knockoff. And so we calculated Twitter's approximate value per share, or

08:34 excuse me, approximate value per user. Twitter is not publicly traded anymore, it doesn't

08:38 have shares. But calculated its value per user. Truth Social has talked about in its

08:44 investor presentations that it values itself at a bit of a discount compared to Twitter.

08:47 There's a number of reasons for that. Truth Social has a smaller user base, so you're

08:51 going to have a lower value per user, or lower revenues per user, because advertisers want

08:55 to reach the biggest audience that they can.

09:00 So again, we're talking about...but the key here is Twitter has 540 million users. Truth

09:07 Social, our best estimate, has no more than 7 million users if we use the former president's

09:13 followers on that platform as sort of a proxy for that. So that puts the value really, really

09:20 low. We came out to a value of around $90 million for the whole company. Again, a very

09:26 far cry from that 5.2 billion.

09:29 If you use Meta as a comparison, so Meta is a publicly traded company. They have a publicly

09:34 available price to share ratio. They're doing fantastic right now. They have huge investments

09:40 in AI. They just announced shareholder dividends. So their share prices are up significantly.

09:48 And so they're trading at about 10 times their annual revenues, market cap annual revenues.

09:52 It's about a 10x multiple. You apply that same thing to Truth Social's, a little over

09:58 $4 million in annual revenue, and you get $40 million as sort of a floor for the company's

10:06 value.

10:07 And I think I should just note one more thing while I'm at it here. On his personal financial

10:13 disclosures, President Trump declares his stake in the company as only being worth $5 to $25

10:20 million. That was filed before it went public, but still remarkable that he's only actually

10:25 valuing his share at that amount on his financial disclosures.

10:32 So you just threw a ton of numbers at us, which I really like. But from your own reporting,

10:37 you found or you believe that Truth Social has about 7 million users. How much then is

10:43 one user worth?

10:47 So again, this kind of depends on how you measure it. If you give them the benefit of

10:51 the doubt and you say that you use the revenue figures that they are projecting they're going

10:57 to have by 2026, and they're saying, and then discounted according to Twitter, that kind

11:02 of thing, we'd be looking at something like $12 or $13 a user. If you actually look at

11:08 their actual revenues from last year, we're looking at something closer to like $0.50 a

11:14 user. These are not enormous values. Compare that to Twitter X. They have a value of over

11:19 $20 a user.

11:20 Wow. So that was my next question, actually. How does its estimated value stack up to other

11:26 social media companies? I'm looking at, I don't know if competitors is the right word,

11:31 but I'm looking at Facebook, Twitter, or X rather, Instagram, companies like that.

11:38 So Truth Social has a very small user base. That 7 million number that I tossed out before,

11:43 that's about the number of followers that former President Trump has on the platform.

11:46 That's why we're using it as kind of their, a rough estimate of their user base. They

11:50 actually don't report their active user numbers. They're not legally required to or anything,

11:55 but they say in their SEC disclosures that they don't even measure that, which is an

11:59 interesting approach for a social media company, but they say they're taking a different approach.

12:05 So because they have such a small user base compared to the billions of people who are

12:08 on all of Meta's, Facebook's, various different platforms, Facebook, Instagram, etc., and

12:14 the 540 million people that Elon Musk and Linda Yaccarino say are on Twitter/X, we're

12:21 talking about a significantly smaller valuation than these big companies.

12:25 Kyle, per usual, thank you so much for your reporting.

12:30 Of course. Always happy to be here, Brittany.

12:31 Thanks, Kyle.

12:32 Thanks, Brittany.

12:32 Thanks, Kyle.

12:33 Thanks, Brittany.

12:33 Thanks, Kyle.

12:34 Thanks, Brittany.

12:34 Thanks, Kyle.

12:35 Thanks, Brittany.

12:35 Thanks, Kyle.

12:36 Thanks, Brittany.

12:36 Thanks, Kyle.

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