It’s Game Over for DJT Stock as Trump Becomes a Lame-Duck President Following Midterm Losses

U.S. stocks soared on Nov. 4, as the midterm election results started coming in. The Dow Jones Index ($DOWI) rose 3% and posted its biggest post-midterm rally in 44 years. The rally was quite broad-based with few exceptions. For instance, artificial intelligence (AI) data center companies’ share prices fell amid fears of tighter regulations. Among others, Applied Digital (APLD) fell 6.7% while CoreWeave (CRWV) shed nearly 10%. Nvidia (NVDA) — which has been the bellwether for AI trade — fell over 3% and is trading below $200, a price level I previously noted as an attractive entry point. 

DJT and Elon Musk Names Plummet After Midterm Results

It was a sombre day for Elon Musk-run companies, and both Tesla (TSLA) and SpaceX (SPCX) fell by over 3%. The world’s richest person donated nearly half a billion dollars this election to Republicans, but his backing didn't help as Democrats flipped both the Senate and the House. While SpaceX listed only this year, Tesla was the ultimate “Trump trade” before the relationship between President Donald Trump and Musk soured, eventually culminating in the latter’s exit from the White House.

Trump Media & Technology Group (DJT), which has been slumping from one low to another, predictably had a terrible day and lost nearly a quarter of its market cap yesterday, entering the penny stock category. The market cap of Truth Social’s parent company fell to $1.25 billion, shaving tens of millions from Trump’s net worth.

I had never been a fan of President Trump’s enterprise, and in an article in 2024, when he was moving closer to securing the GOP nomination for the presidential election, I noted that it would be prudent to stay clear of Digital World Acquisition — the special purpose acquisition company (SPAC) that announced a merger with Trump Media and Technology Group (TMTG). 

Last month, as DJT fell to all-time lows, I noted that it still wasn’t late to exit the stock. The stock has since continued to dwindle, and the midterm election results have only added fuel to the fire. With the stock now trading at fresh record lows, let’s explore whether it's time to buy the dip.

How to Play DJT as Trump Becomes a Lame Duck President

Just as the “Musk premium” drives the valuations of companies Elon Musk heads, DJT’s business and valuations are interwoven with Trump, who is now staring at a lame duck presidency for over two years.

Looking at TMTG’s businesses, apart from Truth Social — an X lookalike that failed to capture the popular imagination — it runs the Truth+ streaming platform and has a financial services arm, Truth.Fi. The company also functions like a Bitcoin treasury firm and held $1.2 billion worth of Bitcoin (BTCUSD) and other digital assets at the end of June. In total, DJT held around $1.9 billion in gross financial assets at the end of June, but the number falls to $893 million after adjusting for debt. If the company's business wasn’t complex enough, it has proposed a merger with TAE Energy, a nuclear fusion company, touting it as key to its long-term success.

DJT never really functioned as a “normal” enterprise, and those buying the company were essentially betting on Trump. It's no coincidence that the company’s different business lines, including the proposed merger with TAE Energy, stand to benefit from the Trump administration’s policies.

For four years, the company was led by David Nunes, a Trump confidante and former Republican congressman from California. In April, DJT appointed Kevin McGurn as its interim CEO. He brings significant experience in streaming and advertising, unlike Nunes, who was previously in the dairy farming business.

In his first earnings call in August, which was eventually the company's inaugural call with analysts and came over two years after going public, McGurn signaled that DJT would start functioning as a normal listed company and promised regular updates and communication. However, I don’t find anything attractive about the business, and would avoid the stock despite the recent sell-off. A lot of DJT's businesses rely on Trump's policies, including the controversial decision to sell faster access to his Truth Social posts. With Trump expected to lose authority after the midterm elections, and his actions inviting greater scrutiny, the game might be over for DJT, even with undemanding valuations and accounting for the massive net financial assets it holds on its balance sheet.

On the date of publication, Mohit Oberoi had a position in: TSLA , NVDA . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.