LinkedIn co-founder criticizes the $6 billion valuation for Trump’s Truth Social: Scandal or guaranteed success?
The recent scandal surrounding the $6 billion valuation of Truth Social, the new social media platform launched by former President Donald Trump, has sparked strong criticism from the co-founder of LinkedIn. This controversy raises questions about the viability and authenticity of this controversial initiative. Between financial scandal and potential success, the future of Truth Social seems uncertain.
The first half of 2024 has been tumultuous for Trump Media & Technology Group (TMTG). Since the company behind Truth Social went public, its stock price has experienced spectacular fluctuations—ranging between $66 and $22 per share—directly impacting the wealth of former President Donald Trump.
An disproportionate valuation according to Reid Hoffman
According to Reid Hoffman, co-founder of LinkedIn and currently a director at Microsoft, TMTG’s valuation is completely unrealistic. Hoffman stated on CNN that the company’s market value, currently around $6 billion, is “absurdly high.” To put it in context, TMTG went public in March with a valuation of $6.8 billion, despite generating only $4.1 million in revenue in 2023.
Comparisons with other tech giants
To better illustrate the gap between TMTG’s valuation and that of other tech giants, Hoffman compared Truth Social with Meta and LinkedIn. Meta, valued at about $1.3 trillion, generated over $130 billion in revenue last year. As for LinkedIn, when it was acquired by Microsoft in 2016, it was valued at $26.2 billion for $3 billion in revenue.
Concerning financial results
The last few months have been particularly difficult for Trump Media. After its public launch, the company’s value quickly reached nearly $8 billion. However, the value dropped drastically after the company revealed a loss of $58 million in 2023. Losses continued to accumulate, exceeding $300 million in the first quarter of 2024, primarily due to its merger with Digital World Acquisition Corp.
Limited audience and little growth
Despite its ambitions, Truth Social struggles to expand its audience. In February, the platform announced approximately 9 million sign-ups, a small figure compared to X (formerly Twitter) with 550 million monthly users and Snapchat’s 800 million. Most of these users are staunch Trump supporters, which limits the platform’s appeal.
Mixed future prospects
With such a limited user base, it is unlikely that Truth Social can reach the critical mass necessary to justify its current valuation. Michael Pachter, research director at Wedbush, estimates that a maximum market of 75 million users would not be sufficient to support this value. He believes that the appropriate valuation for Trump Media should be close to $40 million.
Conclusion: Scandal or success?
Ultimately, the valuation of Truth Social remains controversial. While some experts like Reid Hoffman deem this assessment scandalous, others may see it as untapped potential. What is certain is that Truth Social and Trump Media will need to quickly prove their real value to dispel doubts and ensure their long-term success.
