Trump Media & Technology Group (DJT, Financial), the social media company controlled by former President Donald Trump, saw its shares plunge more than 22% on Wednesday, the worst decline since its listing in March. This decline trims Trump's wealth by $1.3 billion.
Notably, the stock of Trump Media, which operates the Truth Social site, declined rapidly after a recent surge. Over the past five weeks, the stock had more than quadrupled, becoming a speculative play that bore little relation to the actual performance of the company. This speculative bubble burst even though there were no new corporate filings from Trump Media that would typically precipitate such a decline in stock price.
While pinpointing the exact reasons for such a sharp drop may be challenging, market analysts believe that the recent slide is due to a combination of technical trading factors and the loss of a short-term upward trend characteristic of so-called meme stocks.
Until Wednesday's loss, Trump Media was on a steep growth trajectory, propelled by investor confidence that Trump could win the upcoming election. The stock's peak on Tuesday briefly pushed Trump Media's valuation above that of X, Elon Musk's platform, even though Truth Social commands a mere 0.7 million monthly active users in the US, compared to X's 70 million, as a recent survey revealed.
This turn of events underscores the high risks involved with meme stocks and questions whether their prices can be sustained without short-term factors driving them up and down.
