They often say that the bigger they are, the harder they fall.
This seems to hold true for meme stocks, and the Trump Media & Technology Group is no exception.
On its first day of trading, Donald Trump's namesake social media company started strong, opening at $70.90 and surging as high as $79.38 as Trump supporters and opportunistic traders snapped up shares. However, the price faltered later in the session, ending Thursday down $4.26 at $61.96.
Its market valuation, just over $8 billion, is strikingly high for a social media startup with an unproven business model, struggling to attract users and advertisers, and facing financial difficulties.
Market observers suggest that Thursday's decline could mark the beginning of a downward trend. University of Florida professor Jay Ritter predicts that the stock could hit bottom around $2 a share or even lower, with bankruptcy being a likely outcome as the company exhausts its cash reserves.
Trump Media's trading patterns echo those of other meme stocks like GameStop and AMC Entertainment, which saw meteoric rises in 2021 fueled by individual investors on Reddit driving up stock prices.
These stocks are known for their volatility and overvaluation compared to traditional Wall Street standards.
Despite leveraging Trump's brand, Truth Social, Trump Media's flagship product, faces challenges such as declining user numbers and Trump's controversial business history.
Experts like Brent Goldfarb see "no path to profitability" for Truth Social unless it experiences significant growth.
The stock's price is more influenced by sentiment than financial metrics, making it difficult to predict its future.
Trump's wealth increased by about $5 billion on paper with Trump Media's Nasdaq debut, but restrictions prevent insiders from selling shares for at least six months, potentially impacting the stock price if Trump decides to sell.