By Echo Wang
NEW YORK (Reuters) – Trump Media & Technology Group is one of the most actively traded U.S. stocks, but Wall Street stock analysts remain clear.
Shares of the company, which operates former US President Donald Trump’s social media app Truth Social, were listed on Nasdaq on March 26. An army of Trump supporters and speculators have bought up the stock, giving it a market value of about $4.9 billion.
However, unlike lower-valued social media competitors covered by multiple brokers, including Nextdoor, Bumble, and Grindr, there are still no widespread analyst notes from brokers.
Here’s what’s happening with the lack of analyst coverage of TMTG and the reasons behind it.
Are there no brokerages for TMTG?
No analyst note on the company has surfaced yet. JPMorgan Chase, Bank of America and Barclays Plc are among the top brokers that have told Reuters they do not cover TMTG. None of them gave a reason.
A TMTG spokesman declined to comment on the lack of equity funding. “Our focus now, a few weeks after the IPO, is on building our platform and continuing to provide value to our shareholders,” the spokesman said.
Why are there no stock analysts covering TMTG?
Most companies like TMTG, which go public through a merger with a special purpose acquisition company (SPAC) rather than a traditional IPO, have difficulty finding brokerage firms to cover them. This is because the banks that operate these brokerages make little to no money from the analyst reports. They typically create them when they have worked on a company’s public listing, their large institutional clients want such coverage, or they hope the company will hire them for other investment banking work such as transaction advisory or corporate financing.
Few major banks are working on SPAC deals, most of which have performed poorly on the stock market and faced intense regulatory scrutiny. Only one brokerage firm, EF Hutton, advised Digital World, the SPAC that merged with TMTG last month. EF Hutton did not respond to a request for comment on whether the brokerage firm would provide equity coverage of TMTG in the future.
However, even by SPAC standards, TMTG shares are being rejected by analysts. For example, Nextdoor and Grindr, which also went public via SPAC deals, were covered by three and four brokers, respectively, in their most recent earnings announcements.
Why is there a mismatch between trader buzz and stock coverage?
According to Trade Alert’s data, TMTG may be one of the most actively traded U.S. stocks, but this is driven primarily by individual investors rather than Wall Street firms managing other people’s money that brokers take care of.
“An analyst would ask, ‘Why would I spend my time covering this stock if customers don’t want to pay us,'” said Jay Ritter, a professor at the University of Florida who studies stock market listings.
Furthermore, TMTG’s stock market valuation is not linked to the company’s fundamentals.
The valuation represents nearly 1,200 times the loss-making company’s 2023 sales of $4.1 million. No other U.S. company with a similar market capitalization has such a high valuation multiple, LSEG data shows. TMTG has warned investors in regulatory filings that its operating losses cast “substantial doubt” about its ability to remain in business.
Analysts have concerns about covering so-called “meme” stocks like TMTG because any price target they set for them based on a review of their financials will inevitably be much lower than what they achieve through speculative trading.
(Reporting by Echo Wang in New York; Editing by Greg Roumeliotis and David Gregorio)