The “meme stock” that could undermine US democracy
“An underappreciated aspect of Donald Trump’s career,” said John Cassidy in The New Yorker, “is how lucky he has been.” He had a rich father, who financed his first ventures into Manhattan real estate. In the early 1990s, when his casino and hotel empire was mired in debt, the banks agreed to bail him out. A decade later, when his finances were again under strain, NBC transformed his fortunes by selecting him to host its new reality show, The Apprentice. Now, as he faces massive legal fees, Trump “appears to have lucked out again, with Wall Street delivering him a huge financial windfall”. His net worth leapt to about $5bn at the end of last month when Trump Media, the parent company of his social network Truth Social, went public, valued at about $8bn. The company’s stock price has fallen since then, but it remains wildly overvalued considering how few people use Truth Social.
The platform had an estimated five million active users last February, said Renée Loth in The Boston Globe, compared with more than three billion on Facebook. It lost $58m in 2023 and only generated around $4m in revenue, “mostly from ads for miracle cures and Trump-themed trinkets”. Like other so-called “meme stocks”, Trump Media’s success depends on “viral social interest rather than any intrinsic value”. It’s essentially a Ponzi scheme. The hitch for Trump is that, for now, all this wealth exists only on paper, said Nicole Narea on Vox. Major shareholders are generally barred from selling shares until the end of a six-month “lock-up” period; and even if Trump found a way around that rule, alarmed investors might tank the stock before he could cash out.
Trump is “now both a political play and a stock-market play”, said Daniel Henninger in The Wall Street Journal. If he loses the election, shares in Trump Media will be worthless. If he wins, his firm’s value could become tied to his approval ratings. The daily share price would offer “validation of his presidency through the performance metric he respects – money”. It’s a worrying prospect, said Philip Elliott in Time. As president, Trump could drop hints that he is open to making a policy decision, as a signal to those who’d benefit from it to buy Trump stock; or we could find investors buying up stock to gain leverage over him. “If you thought the conflicts of interest in Trump’s first term were problematic”, this could take it to a whole new level.