Meme stock? Trump's newly merged company debuts on the NASDAQ

Former President Donald Trump's newly merged media company, Trump Media & Technology Group, debuted on the NASDAQ (^IXIC) under the ticker DJT on Tuesday morning. The company owns the social media platform Truth Social. The merger took place under a Special Purpose Acquisition Company (SPAC) deal.

Yahoo Finance Reporters Alexandra Canal and Rick Newman join the Live show to break down the latest developments for Trump and the company.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

- Former President Donald Trump's newly merged company, which owns the social media app, Truth Social made its debut on the NASDAQ today under the ticker symbol DJT. To break this down for us, we have Yahoo Finance reporters Alexandra Canal and Rick Newman.

Ali, let's start with you. You're here on set with us, and you've got some of the details on this SPAC, this merger.

ALEXANDRA CANAL: Yeah, and we're seeing this newly merged company trading to the upside this morning. Shares up about 30% right now in premarket trading, just under $65 a share. And we'll continue to track that to see where it opens. But this debut, part of a special purpose acquisition, otherwise known as a SPAC deal, we haven't heard about SPACs in quite some time.

But here, we have Trump Media and Technology comp-- Technology Group, which is a parent company of Truth Social, merging with Special Purpose Vehicle, Digital World Acquisition Corp, otherwise known as DWAC. Now, this was a deal that was approved by shareholders last week prior to the merger. DWAC had been trading on the public markets since 2021.

Of course, Truth Social, this was a social media app that was founded by Donald Trump after he was kicked off major platforms like Facebook and Twitter, which is now known as X, following the January 6 riots in 2021.

Trump is going to maintain roughly a 60% stake in this company, which means he could stand to receive a significant payout down the line with his shares valued at at least, $3 billion if not more depending on trading levels. But he won't be able to cash in quite yet.

According to the stipulations of this merger, there's a six-month lockup period, unless there's a special exception that's approved by the board. So he's not going to be able to use the funds to help with his lawsuits that he has ongoing, along with a campaign fundraising shortfall that he has as he gears up to face President Joe Biden in a 2024 rematch.

So this will be interesting to see how this all plays out. I mean, certainly, I think a net positive for Donald Trump moving forward that he potentially has access to this. Again, you're seeing shares trade at just under 65 bucks.

- Rick, what do you think is this a net positive for Trump? Because like Ali was just laying out there, yes, he owns about a 60% stake here in Trump Media, nearly a 60% stake. Yet the big question is, when he is going to-- if he's going to be able to sell shares in the timeline that he wants to sell his stake?

RICK NEWMAN: This is a windfall for Trump no matter how you look at it. At the opening price yesterday, his stake was valued at about $3.3 billion, and the shares are up. It's hard to calculate between the one ticker now flipping over to the other, but they seem to be up something like 25% since then. So his stake might now be worth more than $4 billion, which could more than double his total net worth.

I mean, whatever restrictions might be on his ability to sell for the next six months, I mean, that is a huge win for Trump. Now, what happens next is quite interesting. From what I've been able to tell by looking at analysts and people who are understanding the company, this can't really be anything other than a meme stock at this point. The company loses money. It doesn't have very much revenue. So where is the value in this company?

I mean, you almost have to say this is a binary investing decision. If Trump does get elected president, then Truth Social could end up be the social media network where everybody has to be. It's going to be the place where the conversations are happening about the next Trump administration. If he loses, Truth Social is just a rump social network that's way smaller than other competitors like X and Facebook and Instagram. And it's hard to see what the value is.

So this is going to be a fascinating stock to watch for the next six months, seven months as we get into the election because it seems to be almost directly a play on whether you think Trump is going to win the election or not.

- Yeah. Rick, and to your point on the revenue, and typically how social media companies make money is on their advertising revenues that they're able to bring in. That's how they create this kind of largely free, but in some cases, increasingly freemium type of model.

And this is a company that, according to some regulatory filings, only had about $3.3 million during the first nine months of 2023. And so how they get to a $9 billion valuation off of that is wildly speculative at this point it seems at best.

RICK NEWMAN: Absolutely.

- All right. Ali and Rick, thanks so much for taking the time here today. We'll be tracking shares of DJT.