DJT stock: Trump Media’s dilution and bankruptcy risks remain

The Trump Media & Technology (DJT) stock price has staged a strong comeback in the past few weeks as the odds of Donald Trump winning the election rose. It has jumped by more than 152% from its lowest level this year and is hovering at its highest point since July. 

Polymarket odds favor Donald Trump

There are rising odds that Donald Trump will win in the next general election. According to a Polymarket poll with $1.9 billion in funds, he has a 55% chance compared to Kamala Harris’ 44%, and the spread has been widening in the past few months.

Still, most official polls show that the race is tight in most swing states. According to the New York Times, Harris is the leader by three points in the national polls. The race is mostly tied in states like Nevada, Wisconsin, Pennsylvania, North Carolina, and Georgia. 

Therefore, with the election less than a month away, it is still too early to predict who will win the race. The DJT stock will do well as investors wait for the next election results in the coming month.

The theory is that a Trump victory will lead to more activity in Truth Social. A loss, however, will likely dent the MAGA Republicans. Trump will also lose a substantial following for the loss, which will affect traffic to the site and appeal from advertisers.

This trend also explains why most Trump-themed tokens are doing well. The MAGA token has soared by more than 370% from its lowest level in August. Similarly, Doland Tremp has jumped by 196%, while MAGA Hat has soared by 150% from its lowest level this year.

Read more: Rumble stock price pattern points to a bearish breakdown

Trump Media bankruptcy is a possibility

In my last article last month, I warned that the odds of a future Trump Media bankruptcy cannot be ruled out. 

Besides, Trump has overseen several bankruptcies in the past, including Trump Taj Mahal in 1991, the Trump Plaza Hotel in 1992, Trump Castle, Trump Hotels & Casino, and Trump Entertainment Resorts. 

The main reason for the rising odds of a bankruptcy is that TruthSocial is no longer growing. Data by SimilarWeb shows that the website had just 13.4 million visits in August, a 18% drop from the previous month.

13.48 million visits for a company valued at over $4 billion is a big stretch. For example, BuzzFeed, a website with over 81 million visitors in the same month is valued at just $90 million. Reddit, which had over 3.2 billion visitors, is valued at over $13 billion.

Ideally, this is the time that TruthSocial should have the most visitors since it is mostly a political social media platform where Donald is the main draw.

Trump understands that the website is not doing well, which explains why he has turned to X, formerly known as Twitter, for his engagement. 

Trump Media is not making money

On top of this, Trump Media is not making any money. The most recent financial results shows that the company’s revenue in the last quarter was just $836k, down from $1.19 million in the same period last year. 

It made a net loss of over $16 million, a trend that could continue in the coming months. This trend is mostly because the company has struggled to get any major mainstream advertisers on its platform. 

In the past few years, many mainstream advertisers have stopped marketing their products on right-leaning media companies.

This situation will likely escalate if Donald Trump fails to win the next general election. If he wins, there is a likelihood that some advertisers, especially foreigners, will start using the site. 

Additionally, Trump Media is run by people with no major experience in the social media industry. Devin Nunes was a Congressman before joining the company, while Eric and Trump Junior have never operated such a company. The only experienced person in the board is Linda McMahon, who operated WWE for years.

Most importantly, Trump Media does not have enough money on its balance sheet. It ended the last quarter with over $343 million in cash and short-term investments. While this is a lot of money, it will not be enough until the company breaks even. This means that existing shareholders should expect more dilution in the future.

DJT stock analysis

The daily chart shows that the DJT share price has staged a strong comeback in the past few days. This recovery happened after it formed a falling wedge chart pattern shown in black.

It has moved above the 50-day and 25-day Exponential Moving Averages (EMA), meaning that bulls are in control. The MACD and the Relative Strength Index (RSI) have continued pointing upwards.

Therefore, the stock will likely continue rising as bulls target the next point at $46.25 ahead of the election. In the long-term, however, it will likely resume the downtrend as investors focus on its fundamentals.

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