Regarding Trump Media, I was right in predicting it would not fail, as also widely predicted by the media. DJT stock, after having bottomed at $13, has recovered significantly:
[It has gained even more since the above screenshot was taken. I wrote this post yesterday.]
The fact DJT has done so well recently and has held up in spite of losing so much money shows the limitations of financial statements and the uselessness of the financial media. Earnings reports are only a lagging snapshot of a company’s fiscal health . Money-losing companies have a tendency of either pivoting or making comebacks (e.g. Uber, Tesla, Amazon, etc.).
Uber pivoted to food delivery during Covid with much success, for example. Amazon pivoted to cloud infrastructure. Tesla went from being a quirky, money-losing niche electric car company destined to join the heap of earlier failures, to suddenly becoming cool during Covid and seeing a huge turnround.
So why has DJT done so well despite these big losses? As I explain in an earlier post, there is a key variable that is totally overlooked, that being free advertising. Trump’s brand is unique in that he gets free advertising, from both Twitter and the media. That alone is worth something.
Many people are stumped as to why DJT has done so well despite large operating losses and endless predictions by the media of its destined demise. If I had to hazard a guess, this is the reason. It’s not because of polls either, as those are unchanged over the past month despite DJT stock nearly tripling. The election is still a toss-up, and there is no evidence to suggest this had materially changed over the past 2 weeks.
If Pizza Hut put out a new pizza it would not get nearly as much media coverage, hype, and virality compared to a Trump-branded pizza. So Pizza Hut would have to advertise extensively to market this pizza, whereas Trump would not.
Advertising is a huge expense in any business. Trump is effectively getting probably hundreds of millions of dollars of free media coverage annually just by existing. Trump can sell merch that costs pennies to produce and then tweet about it, plus the media will talk about it. This means close to 100% profit margins on, say, a $40 hat that costs 40 cents to make, due to not having to advertise. Or a partnership (with Elon?) or a new social network?
Not having to advertise solves one of the biggest problems of any start-up or new endeavor. As someone who has seen countless failed Facebook or YouTube competitors come and go, getting the initial users to get the ball rolling is always the hardest and most expensive part. Trump Media has that covered, as Trump’s fans are the users, so they will go where he goes.
Trump Media yesterday launched a streaming service, Truth+, getting worldwide media coverage at no cost:
Second, Trump’s brand is much bigger now compared to in the 90s and early to mid 2000s, when his companies regularly failed. And his children will inherit the brand, keeping it going in perpetuity. The Apprentice and its many spinoffs had a much more limited audience compared to Twitter and media coverage.
If Trump loses, then DJT will fall, no doubt. But the question is, will he retire, and if so, will he pass the baton of his businesses to his sons? To answer the latter, yes. To answer the first, based on actuarial data and his family history and health, he probably has at least 15 years left, and is healthy enough for a 2028 run should he lose, in which he will win the nomination again. In the interim, DJT will continue to defy predictions of bankruptcy and will find new ways to make money by leveraging Trump’s brand and free advertising associated with it.