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CNN
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Trump Media & Technology Group loses money, generates very little revenue, and its flagship product, Truth Social, remains a relatively small player in social media.

Still, Wall Street values ​​former President Donald Trump's social media company at $9 billion, a price that has more than tripled in just five weeks.

Since plunging to record lows on September 23, Trump Media's stock price has skyrocketed. Market veterans say this monster comeback is being driven almost entirely by bets that Trump will win the White House.

Trump Media is not a normal stock. It's essentially a meme stock, meaning it trades not on fundamentals but on hype and momentum surrounding the Republican candidate's political fortunes. The stock is essentially an indicator of how traders expect the election outcome.

“I've never seen anything like this before. The value of this company depends almost entirely on the outcome of an election,” Gene Munster, managing partner and co-founder of venture capital firm Deepwater Asset Management, said in a telephone interview with CNN.

After rising 32% last week, Trump Media rose another 16% on Monday morning.

Munster said there was “nothing” about Trump Media’s fundamentals that could justify its $9 billion market value.

The company's second-quarter revenue was just $837,000, a tiny amount typically associated with a company valued in the millions, not billions, of dollars.

And yet, Trump Media's stock price has risen more than 200% since September 23rd.

“It sounds crazy, but I think this step is justified because it is a binary outcome,” Munster said. “It's pretty simple: If Trump wins the election, it will be worth more than the $8 billion it's currently worth. And if he loses, it will be worth significantly less.”

In a sign of how closely traders are following the election, trading app Robinhood on Monday launched presidential election event contracts, allowing customers to bet on which candidate they think will win the White House.

Trump is the dominant shareholder in the company that bears his name. His stake of 114.75 million shares is now worth about $5 billion, up from $1.4 billion on Sept. 23. Of course, these are paper profits, and Trump would have a hard time selling stocks without driving down the share price.

The fact that Trump has promised not to sell his stocks – and that he has not disclosed any stock sales – has helped boost the stock price.

George Kailas, CEO of Prospero.ai, a research platform that helps retailers get better market intelligence, told CNN that Trump Media is trading like a classic meme stock.

“Social sentiment increases, peaks, increases the value of the stock and then people start betting on it more and more,” Kailas said.

But Kailas said the massive rally in Trump Media means the company is now trading at more than 1,600 times its enterprise value (a measure of a company's total value, including debt and cash). He described this valuation ratio as “crazy” and pointed out that other popular stocks trade at a fraction of that.

“We see people betting with their hearts,” Kailas said. “There’s no good story about how they’re going to justify that valuation.”

Polls suggest the race for the White House remains incredibly close.

Trump Media's stock price saw a sharp decline in July after President Joe Biden ended his re-election bid. Polls at the time suggested Trump faced an uphill battle to defeat Democratic nominee for Vice President Kamala Harris. But now Trump and Harris are in a dead heat in the latest national polls.

“There is a good case to be made that the company's prospects will improve dramatically if Trump wins the election,” said Steve Sosnick, chief strategist at Interactive Brokers.

When Trump returns At the White House, Sosnick said Truth Social could become an important platform for the president's communications.

“The market is saying that this will be a proprietary platform for the most influential person in the world — and that there is some value in it, that they will find ways to monetize it,” Munster said.

Truth Social is currently relatively small compared to the large social networks.

Although Truth Social is larger than some right-wing social networks like Gettr, Facebook has 200 times more monthly active users on iOS and Android in the U.S., according to Similarweb data shared with CNN.

The user base of X, the social media network formerly known as Twitter, is more than 100 times larger than that of Truth Social. According to Similarweb, Even Threads has 20 times more users than Truth Social.

Trump Media's already volatile stock price could experience further turbulence in the coming days and weeks.

Munster expects Trump Media could continue to make headway in the election and then perhaps pull back a bit if he wins in a classic buy on rumor, sell on news. Move type.

Analysts say a Trump loss could trigger a sharp selloff.

“It will free fall,” Munster said. “If he loses, I suspect it will be a billion-dollar company.”

Sosnick agrees that Trump Media would give up most of its profits if the election doesn't go in Trump's favor.

“If he doesn’t get elected, what’s left? “A company that's a few years old, modest revenues and virtually no profits,” he said. “If the company was called Joe's Media Company, we wouldn't even be talking about it and it wouldn't have nearly this value. The value is entirely tied to the former president.”