Shares of Trump Media & Technology Group (DJT -6.90%) sank on Tuesday. The company's stock plummeted 10.4% as of market close. The fall comes as the S&P 500 jumped 2% and the Nasdaq Composite fell 2.4%.
Trump Media announced on Tuesday that it is raising $2.5 billion to create what would be one of the largest Bitcoin reserves in the world held by a public company.
DJT is betting on Bitcoin
Following in the footsteps of Strategy, Trump Media is betting a massive reserve of Bitcoin will drive value. The company announced it had entered into a deal with institutional investors to raise $2.5 billion in exchange for $1.5 billion in stock and $1 billion in convertible notes.
The proceeds will go to purchasing Bitcoin and holding it as a core Treasury asset. It will be held in conjunction with Anchorage Digital and Crypto.com, which will provide custodial services. The announcement, which aligns with the Bitcoin 2025 conference in Las Vegas, comes at a time when the crypto sits near an all-time high. Aside from claiming this will drive value, CEO Devin Nunes pitched the move as a hedge against what he calls "financial discrimination," calling Bitcoin "the apex instrument of financial freedom."
Image source: Getty Images.
Be careful
Investors should remember that Trump Media is a company with essentially no revenue, operating deep in the red. Despite sales last quarter of $821,200 and a net loss of nearly $32 million, the company is valued at nearly $5 billion. That kind of disparity is only remotely reasonable if there is a promising path to profitability and significant revenue growth that would eventually justify a market cap of that size. There is not one. Trump Media wasn't a good investment before today's announcement, and it is not one now.
