Most people will be familiar with the name Truth Social Media, the brainchild of the Trump organisation to replace Twitter (or X as it is now known). Of course now that it has been acquired by a SPEC (special purpose acquisition company) it is according to some worth anywhere from $3 billion to $ 6 billion. Valuation for companies is rarely based on historical performance but still, Since inception in 2021 TSM has generated sales of about $12 million per annum and losses of about $40 million (figures from the IPO docs).
As an investors you have to understand that valuation is a tricky thing, because it is based on the expectation of future revenues and profits, and not the past. Tesla at its peak had a p/e over 1,400, but revenues, and profits caught up, and the enterprise's valuation reflects that reality (p/e today 40.. stock price is higher then it was). There has also been companies such as the GrillCheese Truck company that had a valuation of several hundred million, while it only operated 7 food truck at a loss. GameStop is another example, insane valuation based on nothing.
Where does Truth sit? Good question, because aside from those who have been banned from Twitter because of their comments, who uses it? The issue is how does the platform increase viewership to attract advertisers and thereby revenues and profits. What company will advertise on a site that seems to not only supports but encourages violence against minorities and women? It is a hard nut to crack. In fact, if you take the trouble of reading the IPO document (I have not, but a good friend did) it only mention advertising in general will come to the platform.
The best way to think of the valuation of Truth Social is to think Bitcoin -- the same metrics analysis has to be used here. What's the next sucker ready to pay? Sometimes it can be a very profitable trade.
Note: I was careful not to use the real ticker name...don't want anyone to refer to this on that trade.
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