Business
Column: With his Truth Social stock, Trump may be laughing all the way to the bank — but his investors have reason to weep
With their life savings, childrens’ college funds and their own retirement prospects at stake, most people probably view investing in stocks as a serious business. Now and then, however, the markets produce comedy gold.
Hello, Trump Media & Technology Group.
The owner of Truth Social, a social media platform exclusively hitched to Donald Trump, staged an initial public offering March 26 amid a torrent of speculation over how many billions the IPO would produce for Trump himself. In the event, the figure was a paper gain of about $5 billion for him, virtually pure profit.
It’s a scam. Just like everything he’s ever been involved in, it’s a con.
— Barry Diller on Trump and Trump Media
The cult of Trump had sent the shares soaring as high as $79.38 on that first day, valuing the company at about $9.5 billion. By the end of the day it had settled back to $57.99. Since then, it has mostly been on the schneid, falling steadily.
As I write, midway in the trading day Tuesday, the shares are quoted at $22.80, down more than 14% on the day. That brings the shares’ slide since they peaked at $79.38 on March 26 to about 70.2%.
Trump, who loves hyperbole, might revel in a three-week plunge that could be some sort of a record. Whether he would call it “beautiful,” one of his favorite superlatives, is another question.
The slide has pared the market value of Trump Media by more than $6 billion from its peak. Trump is still sitting on a paper holding worth more than $2 billion, but his outside investors, many of whom are small investors who bought at or near the top, have been been taken to the abattoir.
“I think they’re dopes,” the veteran entertainment executive Barry Diller said of Trump Media’s investors during a CNBC appearance on April 4.
That’s not to say, given the stock’s volatility, that it might not recover and end up in the green for the day, though whether it can recover the full 69.8% loss, even over time, is subject to doubt.
Still, the raw numbers, being right there for everyone to view in bright red, aren’t as interesting as the underlying grift. Let’s examine that.
It’s fair to say that few if any experienced investment professionals expect Trump Media to have staying power as a high-flying stock. I raised the most pertinent issues a few days before the IPO: The company had meager revenues and huge losses. It was to be taken public via a device — a special purpose acquisition company, or SPAC — that was often used to circumvent government rules for disclosures to investors.
Trump Media’s expected value of $5 billion at the IPO swore at common sense, or at any traditional standard of securities valuation. In short, Trump Media looked like any number of other Trump ventures, such as Trump University — all promise, no delivery.
“It’s a scam,” Diller told his CNBC interviewers. “Just like everything he’s ever been involved in, it’s a con.”
No one at Truth Social responded to my request for a comment about Diller’s remark.
Earlier, I asked whether anyone should believe in the valuation projections, and whether anyone in their right mind would invest. My answers were probably not, and probably not. That was conjecture, not investment advice.
After the IPO, however, more issues were disclosed that contributed to the stock’s precipitous slide. The company’s first annual report, issued April 1, incorporated an obligatory section on risk factors to be pondered by investors that included the traditional warnings about the costs of competition, the prospects of litigation, and the dangers of technology failures — and a couple that aren’t normally seen in corporate disclosures.
One covered the downsides of Trump Media’s linkage with Trump — that Truth Social faced “greater risks than typical social media platforms because of … the involvement of President Trump.” Those risks include “harassment of advertisers or content providers, increased risk of hacking of [Truth Social’s] platform, lesser need for Truth Social if First Amendment speech is no longer believed to be suppressed by other similar platforms, criticism of Truth Social for its moderation practices, and increased stockholder suits.”
The report made clear, if anyone was unaware of this, that the value of its brand “may diminish if the popularity of President Trump were to suffer,” as it would from “the death, incarceration, or incapacity of President Trump.”
Perhaps more telling was the company’s disclosure that it was not planning to “collect, monitor or report” the traditional metrics used by other social media platforms, such as Meta and X (formerly Twitter). Among those performance measures are “average revenue per user, ad impressions and pricing, … monthly and daily active users” — in other words, all the statistics that tell a social media company who, if anyone, is using it, and what their participation is worth in dollars and cents.
Having that information would only “divert” the company’s management, the report said, though it wasn’t clear about how management would fashion a strategy for the future if it doesn’t know where it is at present, including just how many users it has.
The annual report also updated Trump Media’s financial statements to cover the full year 2023: The platform lost more than $58 million on revenue of a bare $4.1 million. Previous disclosures had covered only the first nine months of 2023, when the company said it lost $49 million on $3.4 million in revenue.
On Monday, shareholders got another surprise. Trump Media said in a public filing that it planned to issue 40 million new shares to insiders (36 million of them to Trump himself) and that warrant holders were entitled to 21.5 million additional shares of stock, which could be expected to reach the open market almost immediately upon the warrants’ conversion.
That means existing shareholders are about to be heavily diluted, left with less of the company than they anticipated. The shares plunged more than 18% on Monday.
Who benefits from these maneuvers? Trump does. He is in effect the owner of 64.9% of the company, including the 36 million new shares; no one else owns more than 7.3%. For him this isn’t much of an investment; 36 million of his 114.7 million shares are a handout that didn’t require him to put up his own money. The rest were issued to him via the IPO in return for his interest in Trump Media as a private company.
Trump’s financial role in the founding of Truth Social in 2021 may have been minimal or nonexistent; Reuters reported in 2022 that most of the $38 million raised in the company’s first year came from businessmen who were political allies of Trump and from borrowings from unidentified lenders.
Trump has almost no ability to convert his shareholdings to cash in the near term, however. As a Trump Media insider, he is prevented from selling or borrowing against his shares for at least six months.
If and when he places any of his shares on the market, he would be selling into a declining market. Trump Media is the memiest of “meme stocks,” its value entirely divorced from financial fundamentals and based entirely on his involvement in the enterprise.
That places the value of his stake on a knife-edge. Any indication that he is reducing his commitment would almost certainly provoke a stampede for the exits among other shareholders. Trump would be racing to cash in before the value of his holdings reached the vanishing point.
Who are the other shareholders? According to a survey by the Washington Post, many are retail investors who believe that Trump’s touch is gold, or thought that buying his shares was a way to express faith in Trump and perhaps make some money on the side. At this moment, they are staring into the abyss.
Business
U.S. Space Force awards $1.6 billion in contracts to South Bay satellite builders
The U.S. Space Force announced Friday it has awarded satellite contracts with a combined value of about $1.6 billion to Rocket Lab in Long Beach and to the Redondo Beach Space Park campus of Northrop Grumman.
The contracts by the Space Development Agency will fund the construction by each company of 18 satellites for a network in development that will provide warning of advanced threats such as hypersonic missiles.
Northrop Grumman has been awarded contracts for prior phases of the Proliferated Warfighter Space Architecture, a planned network of missile defense and communications satellites in low Earth orbit.
The contract announced Friday is valued at $764 million, and the company is now set to deliver a total of 150 satellites for the network.
The $805-million contract awarded to Rocket Lab is its largest to date. It had previously been awarded a $515 million contract to deliver 18 communications satellites for the network.
Founded in 2006 in New Zealand, the company builds satellites and provides small-satellite launch services for commercial and government customers with its Electron rocket. It moved to Long Beach in 2020 from Huntington Beach and is developing a larger rocket.
“This is more than just a contract. It’s a resounding affirmation of our evolution from simply a trusted launch provider to a leading vertically integrated space prime contractor,” said Rocket Labs founder and chief executive Peter Beck in online remarks.
The company said it could eventually earn up to $1 billion due to the contract by supplying components to other builders of the satellite network.
Also awarded contracts announced Friday were a Lockheed Martin group in Sunnyvalle, Calif., and L3Harris Technologies of Fort Wayne, Ind. Those contracts for 36 satellites were valued at nearly $2 billion.
Gurpartap “GP” Sandhoo, acting director of the Space Development Agency, said the contracts awarded “will achieve near-continuous global coverage for missile warning and tracking” in addition to other capabilities.
Northrop Grumman said the missiles are being built to respond to the rise of hypersonic missiles, which maneuver in flight and require infrared tracking and speedy data transmission to protect U.S. troops.
Beck said that the contracts reflects Rocket Labs growth into an “industry disruptor” and growing space prime contractor.
Business
California-based company recalls thousands of cases of salad dressing over ‘foreign objects’
A California food manufacturer is recalling thousands of cases of salad dressing distributed to major retailers over potential contamination from “foreign objects.”
The company, Irvine-based Ventura Foods, recalled 3,556 cases of the dressing that could be contaminated by “black plastic planting material” in the granulated onion used, according to an alert issued by the U.S. Food and Drug Administration.
Ventura Foods voluntarily initiated the recall of the product, which was sold at Costco, Publix and several other retailers across 27 states, according to the FDA.
None of the 42 locations where the product was sold were in California.
Ventura Foods said it issued the recall after one of its ingredient suppliers recalled a batch of onion granules that the company had used n some of its dressings.
“Upon receiving notice of the supplier’s recall, we acted with urgency to remove all potentially impacted product from the marketplace. This includes urging our customers, their distributors and retailers to review their inventory, segregate and stop the further sale and distribution of any products subject to the recall,” said company spokesperson Eniko Bolivar-Murphy in an emailed statement. “The safety of our products is and will always be our top priority.”
The FDA issued its initial recall alert in early November. Costco also alerted customers at that time, noting that customers could return the products to stores for a full refund. The affected products had sell-by dates between Oct. 17 and Nov. 9.
The company recalled the following types of salad dressing:
- Creamy Poblano Avocado Ranch Dressing and Dip
- Ventura Caesar Dressing
- Pepper Mill Regal Caesar Dressing
- Pepper Mill Creamy Caesar Dressing
- Caesar Dressing served at Costco Service Deli
- Caesar Dressing served at Costco Food Court
- Hidden Valley, Buttermilk Ranch
Business
They graduated from Stanford. Due to AI, they can’t find a job
A Stanford software engineering degree used to be a golden ticket. Artificial intelligence has devalued it to bronze, recent graduates say.
The elite students are shocked by the lack of job offers as they finish studies at what is often ranked as the top university in America.
When they were freshmen, ChatGPT hadn’t yet been released upon the world. Today, AI can code better than most humans.
Top tech companies just don’t need as many fresh graduates.
“Stanford computer science graduates are struggling to find entry-level jobs” with the most prominent tech brands, said Jan Liphardt, associate professor of bioengineering at Stanford University. “I think that’s crazy.”
While the rapidly advancing coding capabilities of generative AI have made experienced engineers more productive, they have also hobbled the job prospects of early-career software engineers.
Stanford students describe a suddenly skewed job market, where just a small slice of graduates — those considered “cracked engineers” who already have thick resumes building products and doing research — are getting the few good jobs, leaving everyone else to fight for scraps.
“There’s definitely a very dreary mood on campus,” said a recent computer science graduate who asked not to be named so they could speak freely. “People [who are] job hunting are very stressed out, and it’s very hard for them to actually secure jobs.”
The shake-up is being felt across California colleges, including UC Berkeley, USC and others. The job search has been even tougher for those with less prestigious degrees.
Eylul Akgul graduated last year with a degree in computer science from Loyola Marymount University. She wasn’t getting offers, so she went home to Turkey and got some experience at a startup. In May, she returned to the U.S., and still, she was “ghosted” by hundreds of employers.
“The industry for programmers is getting very oversaturated,” Akgul said.
The engineers’ most significant competitor is getting stronger by the day. When ChatGPT launched in 2022, it could only code for 30 seconds at a time. Today’s AI agents can code for hours, and do basic programming faster with fewer mistakes.
Data suggests that even though AI startups like OpenAI and Anthropic are hiring many people, it is not offsetting the decline in hiring elsewhere. Employment for specific groups, such as early-career software developers between the ages of 22 and 25 has declined by nearly 20% from its peak in late 2022, according to a Stanford study.
It wasn’t just software engineers, but also customer service and accounting jobs that were highly exposed to competition from AI. The Stanford study estimated that entry-level hiring for AI-exposed jobs declined 13% relative to less-exposed jobs such as nursing.
In the Los Angeles region, another study estimated that close to 200,000 jobs are exposed. Around 40% of tasks done by call center workers, editors and personal finance experts could be automated and done by AI, according to an AI Exposure Index curated by resume builder MyPerfectResume.
Many tech startups and titans have not been shy about broadcasting that they are cutting back on hiring plans as AI allows them to do more programming with fewer people.
Anthropic Chief Executive Dario Amodei said that 70% to 90% of the code for some products at his company is written by his company’s AI, called Claude. In May, he predicted that AI’s capabilities will increase until close to 50% of all entry-level white-collar jobs might be wiped out in five years.
A common sentiment from hiring managers is that where they previously needed ten engineers, they now only need “two skilled engineers and one of these LLM-based agents,” which can be just as productive, said Nenad Medvidović, a computer science professor at the University of Southern California.
“We don’t need the junior developers anymore,” said Amr Awadallah, CEO of Vectara, a Palo Alto-based AI startup. “The AI now can code better than the average junior developer that comes out of the best schools out there.”
To be sure, AI is still a long way from causing the extinction of software engineers. As AI handles structured, repetitive tasks, human engineers’ jobs are shifting toward oversight.
Today’s AIs are powerful but “jagged,” meaning they can excel at certain math problems yet still fail basic logic tests and aren’t consistent. One study found that AI tools made experienced developers 19% slower at work, as they spent more time reviewing code and fixing errors.
Students should focus on learning how to manage and check the work of AI as well as getting experience working with it, said John David N. Dionisio, a computer science professor at LMU.
Stanford students say they are arriving at the job market and finding a split in the road; capable AI engineers can find jobs, but basic, old-school computer science jobs are disappearing.
As they hit this surprise speed bump, some students are lowering their standards and joining companies they wouldn’t have considered before. Some are creating their own startups. A large group of frustrated grads are deciding to continue their studies to beef up their resumes and add more skills needed to compete with AI.
“If you look at the enrollment numbers in the past two years, they’ve skyrocketed for people wanting to do a fifth-year master’s,” the Stanford graduate said. “It’s a whole other year, a whole other cycle to do recruiting. I would say, half of my friends are still on campus doing their fifth-year master’s.”
After four months of searching, LMU graduate Akgul finally landed a technical lead job at a software consultancy in Los Angeles. At her new job, she uses AI coding tools, but she feels like she has to do the work of three developers.
Universities and students will have to rethink their curricula and majors to ensure that their four years of study prepare them for a world with AI.
“That’s been a dramatic reversal from three years ago, when all of my undergraduate mentees found great jobs at the companies around us,” Stanford’s Liphardt said. “That has changed.”
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