The Bigger Story Behind Trump's Meme Stock Windfall

Meme assets are here to stay.

Donald Trump’s net worth tripled this week.

According to the Bloomberg Billionaires Index, Trump is worth around $6.5 billion today, up from $2.3 billion a week ago.

You’re probably wondering: how the heck did Trump make so much money so quickly?

He did it with the help of this stock right here: Trump Media & Technology Group (DJT).

You see, right after his presidential term ended in early 2021, Trump started a company called Trump Media.

A few months later, that media company decided to list its stock publicly through a SPAC merger—which is an unusual way of going public, but it was something that a lot of small, speculative companies were doing back in 2021.

Trump Media had no products and no revenues, let alone any profits, but it had the backing of Donald Trump, which was enough to send shares of the SPAC— the shell company that Trump Media wanted to merge with— through the roof.

Again, this was in 2021— the year of GameStop, AMC and a whole bunch of other speculative manias— so to see a Trump-associated shell company take off wasn’t all that shocking.

Several months after Trump Media announced that it was going public, it released its first product: Truth Social, a social media platform that claimed to be a censorship-free version of Twitter (the same Twitter that banned Trump from posting several months prior).

The buzzy new product sent shares of the shell company even higher, and the stock hit a record in early March of 2022.

Everything was great for Trump and his new company.

But unfortunately for the former president, it wouldn’t stay that way. As 2022 went on, the stock market tanked and the massive bubble that had formed in the speculative parts of the market burst in spectacular fashion.

The SPAC associated with Trump Media plummeted over 80% in just six months.

Making matters worse, the deal to take Trump Media public through the SPAC merger was at risk of falling apart.

Investigations by the Securities and Exchange Commission and the Department of Justice related to fraud and insider trading had thrown a wrench into the deal.

There was a very real risk that the merger wouldn’t happen and Trump Media would run out of money and go bankrupt.

That, of course, didn’t end up happening. To make a long story short, Trump Media and the shell company somehow managed to stay afloat over the next two years.

They scrounged up some extra money and they eventually settled with the SEC, ending the main investigation that was holding up the merger.

This week, Trump Media finally went public and the stock exploded to the upside.

That’s how Donald Trump’s net worth jumped so dramatically. He owns 58% of the company, which, at today’s stock price, is worth $5.8 billion.

To put that in perspective, that represents over two-thirds of Trump’s net worth, way more than his real estate empire.

The crazy part about all of this is that other than officially becoming a publicly-traded company, nothing much has changed for Trump Media over the past two years.

Truth Social hardly has any users (relative to other social media platforms), it generates almost no revenues and it’s losing money.

Yet, the stock market is valuing Trump Media, whose only product is Truth Social, at $10 billion—which for context, is around the same market value as Campbell Soup, a company that generates almost $1 billion in profits every year.

But all of that doesn’t really matter. Speculative fervor is back in the stock market, and traders are pouring money into anything that might make them a quick buck.

We haven’t reached 2021 levels of speculation, but there’s a lot of it, in everything from A.I.-related stocks to crypto and now Trump Media stock as well.

Donald Trump has that speculation to thank for his windfall.

Fundamentals Matter Eventually

Now, you might be wondering—can this last? Can a company that makes no money be valued at such a high price indefinitely?

And the answer to that is: probably not. Over the long term, stocks tend to be priced based on their fundamentals—things like profits and dividends.

GameStop, AMC and other meme stocks that were big in 2021 are down significantly from their peak levels, and that’s because their fundamentals can’t justify those high stock prices.

We’ll probably see something similar happen to Trump Media. Unless Truth Social becomes the next big social media platform that everyone uses, or Trump Media comes out with some other highly profitable product or service, the stock will eventually trade at a much lower level.

But that doesn’t mean that Donald Trump won’t benefit from the current craze in Trump Media stock.

The man owns a lot of the stock. And if there’s people clamoring to buy it, he’s going to sell it to them, cashing out with hundreds of millions, if not billions of dollars.

There is a six-month lock-up period, meaning that Trump isn’t allowed to sell his stock for that amount of time following the completion of the SPAC merger. But that restriction can easily be waived by the company, and I suspect that it will be waived to help Trump out.

Meme Assets Normalized

I think the bigger story here, though, has nothing to do with Trump. It’s this idea that meme stocks or meme coins in the case of crypto, are becoming a normal part of our financial markets.

A lot of people thought that when the bubble burst in 2021, it was over and we’d never see something like GameStop or Dogecoin happen again.

But here we are almost three years later and a lot of the same types of things are happening again.

Dogecoin is back to a $25 billion valuation and Trump Media, with almost no revenues to speak of, is worth $10 billion.  

What this suggests is that meme assets are starting to be normalized. And that’s something new.

Sure, we’ve seen financial market bubbles all throughout history. A typical bubble is when investors bid asset prices to levels well beyond what they’re worth based on fundamental factors—but it’s because of those fundamentals that investors are so excited about those assets in the first place.

The dotcom bubble and the housing bubble are great examples of this. People might have been overly exuberant about internet stocks and real estate back in the late 1990s and early 2000s, but there were real, fundamental reasons to be excited about those assets.

In the case of meme stocks and meme coins, there often aren’t any traditional fundamental factors underpinning their value.

The buyers of these assets know that and yet, they don’t care. To them, it’s a game or a form of gambling where people who buy in early get rich, while latecomers end up with huge losses.

So, this might be something that’s here to stay. When people in the financial markets are feeling good and they have money to risk, we might see more activity in meme assets.

And when the markets are going down and people aren’t feeling so great, we might see less meme asset activity.

I also imagine that every time we get one of these speculative waves, we’ll see a combination of new and old meme assets.

Some assets, like the stock of AMC, will only be meme assets for a short period of time. AMC was a big winner and meme stock in 2021, but this year, it’s not doing anything.

That’s probably going to be what we see for most meme assets. They’ll have their moment in the sun and then they’ll flame out and never be meme assets again.

But a small number of assets might maintain their meme status for a long time.  

And if they do it for long enough, they might graduate to become something bigger with lasting value—like bitcoin.

If you think about it, bitcoin is a lot like other meme assets. People buy it with the hope that they can sell it to someone else at a higher price later.

It’s valuable because it represents a powerful idea: that you can own a digital currency with a fixed supply that can’t be controlled by any one entity.

This idea is a meme—it spreads from person to person over time—and it’s what has enabled bitcoin to be so resilient and bounce back every time that it’s been knocked down.   

We’re seeing something similar happen to dogecoin. Yes, it has a much less serious meme associated with it than bitcoin, and people are buying it for different reasons, but its value is proving to be durable all the same.