A Truth Social Bitcoin ETF Could Be Coming This Year. Here's What That Might Mean for Trump Media Stock.

Globe and Mail

4 hours ago

One way companies can try and drum up interest in their businesses is by getting involved with cryptocurrencies, especially given how hot Bitcoin (CRYPTO: BTC) has been this year. Holding Bitcoin or simply being bullish on the digital asset can attract growth investors who think alike.
Trump Media and Technology Group (NASDAQ: DJT) is a great example of a company that looks to be trying to benefit from crypto's growing popularity. This month it made multiple announcements related to launching exchange-traded funds (ETFs) that will invest in popular digital currencies. And that's on top of earlier plans to stockpile Bitcoin.
What does this all mean for investors, and can this make Trump Media a more attractive buy, as it potentially benefits from Bitcoin's rising value? Or will it simply add more risk and volatility?
The Truth Social Bitcoin ETF could be coming soon
On June 5, Trump Media announced a filing with the Securities and Exchange Commission (SEC) to launch an ETF that will hold Bitcoin. Called the Truth Social Bitcoin ETF, it is currently pending approval, with the expectation that it will launch sometime this year. And on Monday, it announced plans for a new fund which will invest in both Bitcoin and Ethereum. It will be called the Truth Social Bitcoin & Ethereum ETF.
This comes after the company announced just last month its intent to raise $2.4 billion as part of a plan to become one of the largest corporate holders of Bitcoin. Holding Bitcoin and crypto as a whole appears to be part of a broader long-term strategy for Trump Media, potentially both as a way to grow and diversify its operations and also to attract a wider range of investors.
What this could mean for Trump Media
The launch of multiple crypto-focused ETFs could generate a lot of interest in Trump Media stock, possibly making it more of a compelling option for crypto investors. However, with multiple crypto ETFs to choose from, it's questionable how much interest the funds may attract from investors, and a lot will depend on how competitive the fees are.
Unfortunately, this isn't likely going to result in a huge improvement in the company's financials. High fees would be necessary to generate strong margins, and that would likely end up dissuading investors in the process. The biggest problem for Trump Media is that while it has been expanding into different areas, including streaming and financial services, this remains a highly unprofitable, cash-burning business. In the trailing 12 months, Trump Media incurred losses totaling $105 million on revenue of just $3.7 million.
This crypto strategy could make Trump Media stock a more volatile and speculative investment overall. It has the potential to rise along with the general bullishness surrounding Bitcoin and the crypto markets as a whole, but based on its own fundamentals, it's not likely going to attract many growth investors.
Should you invest in Trump Media stock?
Trump Media is clearly trying to get deeper into crypto, and it may be little wonder why, given how well Bitcoin has performed this year, reaching record levels. But simply having crypto ETFs and stockpiling Bitcoin doesn't mean that will lead to sustainable, long-term returns for investors.
Unless the company's financials show that there is a strong underlying business here to invest in, investors should tread very carefully with this stock, as it comes with high risk. This isn't a stock that's going to be suitable for the vast majority of investors as its poor financials suggest frequent stock offerings could be inevitable, and a heavy exposure to crypto may add to its volatility in the long run.
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