DJT – The Ultimate Meme & RFK Jr.’s Dream Ticket - Top 3 Takeaways – March 27th, 2024
- The ultimate meme. It’s seemingly most appropriate that it was just last Thursday Reddit, the online forum which gave birth to the so-called ‘meme’ stock phenomenon came public (and itself seemingly became a beneficiary of the meme stock phenomenon based on its trading activity since). That’s because the next high-profile stock to make its publicly traded debut just may be the ultimate meme stock. DJT. Trump Media & Technology Group, the parent of Truth Social, surged on its first day of trading leading to a steady trail of posters on WallStreetBets to promote DJT...”to the moon”. On that note, it’s approximately 238,900 miles from where we sit in Florida to reach the moon. A number that isn’t all that much larger than the multiple applied to DJT’s stock as it opened for trading yesterday. At the peak of trading the value of Trump Media & Technology Group reached $9.6 billion. How rich is a valuation of 9.6? When it comes to stock market valuations there are many ways a business may be valued based upon what phase of the company’s life cycle it’s in. For startups/young companies, that’s often based on the belief in future growth and off of a multiple of revenue generated by the company as opposed to profits (as most startups and young companies are unprofitable). Like many publicly traded companies that are only three years old, the Trump Media & Technology Group has yet to turn a profit. Unlike any other company like it...it’s revenue multiple doesn’t appear to matter.
- Or any business fundamentals for that matter – for now. When DJT went public it had to make its financials available for investors to see. And what do you see when you look at DJT’s financials? $3.2 million in revenue through the first three quarters of its current fiscal year...$15.6 million in losses over its most recently completed fiscal year. Anytime we’re interchanging millions with billions in the same discussion, as in billions of dollars in valuation for the company, with only a few million dollars in revenue generated by it – you might begin to understand the potential value gap even without needing to understand much about capital markets. To provide you with an idea of how richly valued DJT was at its peak yesterday (and essentially still is today), the average revenue multiple of an American social media company is 2.1x. What would that mean if applied to DJT? Using the annualized revenue estimate for the company – of $4.3 million... It would mean a company valuation of about $9 million. Not $9 billion, which it traded at, but $9 million. That means DJT has traded at a valuation that’s literally 1,000 times greater than that of its peers. If converted to miles you’d still be a long way from the moon but as far as market premiums go...you’d effectively have been running a shuttle to and from there. Even if you applied the most aggressive revenue multiples applied to high growth startups...a 20 multiple to revenue – you'd still have an enterprise valued at just $86 million or one that’s been valued greater than 100x. The rest is the Trump premium being applied to the stock. Which, if I were Trump’s legal team, I might use as Exhibit “A” in his appeal over his New York civil fraud case where he’s alleged to have overstated asset values to creditors. No value the Trump Organization ever put on an asset statement begins to compare with the value public investors have put on his newly traded company. There might not be a stronger indication of the breadth and depth of Trump’s base of supporters than the current value of Trump Media & Technology Group. There’s never been any other meme stock valued like it. Speaking of lots of money...
- It's all about the Benjamins. First, it’s been 22 years since that film came out. That made me feel old. Second, no, Ice Cube isn’t RFK Jr.’s running mate. It also isn’t Aaron Rodgers or Jesse Ventura (who was last politically relevant at about the time that All About the Benjamins was). It is Nicole Shanahan...someone you’ve probably never heard of. Who’s she? Why her? It’s all about the Benjamins of course. So, who is she? She’s the woman who paid for RFK Jr.’s Super Bowl commercial. Where does her money come from? Google aka Alphabet (the parent of Google). Nicole is the former wife of Google co-founder Sergey Brin (and if you’re to believe the tabloids, Elon Musk’s ex-lover – their alleged tryst is what some say ended her marriage – they both deny it). As you might imagine being the ex-wife of a Google co-founder is a value thing. While the terms of her divorce settlement were private – she last publicly was known to have demanded $1 billion. Sergey was worth over $100 billion at the time. There’s a good chance she got it. If there’s one thing that RFK Jr. needs more than a flashy high-profile running mate – it's Benjamins. He needs a lot of them to gain ballot access in many states. In Shanahan he has the perfect partner. Someone who likes funding unusual Democrat presidential candidates. Prior to doling out dough for RFK’s presidential bid (which first began as a Democrat) she’d previously donated to Marianne Williamson’s presidential bid and to the Buttigieg’s. In fact, she hosted a fundraiser for Mayor Pete in 2020. To date RFK Jr. has only officially qualified for the ballot in one state – Utah. He’s very close in at least seven more. But at best that would leave him with only eight down and 42 more to go. Some states require a candidate to have a running mate to qualify for the ballot. So, with Shanahan check. All of the remaining states require jumping through hoops that require lots of money to overcome them. With Shanahan onboard that’s also a check. Like literally. Rather than funding other people’s goofy presidential campaigns she can fund her own goofy Vice Presidential campaign. But a campaign that if it’s successful, will almost certainly have a profound effect on the outcome of the presidential election. RFK Jr. is consistently polling with Ross Perot circa 1992 levels of support.