Former president Donald Trump’s digital media company is losing money, and lots of it. But why is that any different from other “startups,” which often struggle to post a profit for years, if they ever do?

There are a couple reasons.

First, as a recap: Trump Media and Technology Group recently merged with Digital World Acquisition Company in a SPAC, the ill-starred financial instrument that, more often than not, represents a last-ditch option for a substantial cash infusion. The company is on the NASDAQ as, predictably, $DJT.

An important part of going public is revealing your finances to all the world, and TMTG recently filed its first quarterly financial report with the SEC that everyone can look at and analyze. The financial press is having a field day, but the upshot is that TMTG is losing a lot of money and generating next to none. Specifically, the company lost $58 million on only $4 million in revenue.

Those inclined to be charitable to a tech startup challenging entrenched rivals — regardless of its “mission” or leadership — may reasonably observe that this imbalance is common among early-stage companies with big ambitions. And so it is — who can forget that Uber operated with tremendous losses for years in order to undermine the taxi industry’s business model?

TMTG is superficially similar, primarily in that it doesn’t make money. But that doesn’t make it a startup on the verge of explosive growth. There are three big, straightforward reasons why:

• TMTG isn’t growing. Truth Social, the main business of TMTG, has failed to attract more than a few million users. It has not demonstrated the kind of traction any startup would need to show in order to suggest that it’s the next big thing, or really anything at all (as others have pointed out, Twitter had $665M in yearly revenue when it IPO’d). The incredibly low revenue numbers tell us that its only income source, advertisers, don’t want to pay for what audience is there. And there’s no real reason to expect this to change.
• TMTG doesn’t have VC runway. Venture capital is a high-risk, high-reward strategy where fundamentally unprofitable businesses are propped up until something changes and they can make money. This gives startups freedom to do risky things like overhire, charge too little, and kick the “business model” can down the road, sometimes forever. If investors are confident, and the product has traction — like Uber — they will pour billions into it because they are confident that they will eventually make that back. But in his current precarious state, Trump would be a risky bet even for a VC. But that’s all moot because:
• TMTG is now accountable to its shareholders. Small startups may have to report to their VC masters now and then, but they have free rein compared with public companies, which have fiduciary duty to their shareholders. Though Trump is the largest TMTG shareholder at 60%, the other 40% are watching closely for any breach of this duty — such as a fire sale on shares, or a loan that drastically undervalues the company. But the important piece here is that TMTG doesn’t have the freedom to throw cash around (they have none anyway) and take risks. The basic idea of going public is that you have a business that others want to share in — TMTG simply doesn’t.

The result is, as the analysts have already pointed out, that $DJT is fundamentally and wildly overvalued. The company is vanishingly unlikely to make a profit any time soon, let alone the kind of profit that would justify the share price and multi-billion-dollar valuation. Even the most optimistic scenarios probably envision solvency as a far-off goal.

On the other hand, given the majority owner’s personal, political, legal, and business woes, there is a very real risk that the whole thing will implode before the year is out.

The fact of the matter is that the share price is completely unconnected to the performance of the company, rendering it essentially a “meme stock” that will be priced arbitrarily and perhaps manipulated by public investors.

While that may make a few day traders and short sellers money over the next few days and weeks, it’s not the kind of thing that retains value long term, particularly with TMTG’s lack of assets. By the time Trump is able to sell his shares, it’s likely this company will be worth anything like what it supposedly is today. It’s not even worth what it was this morning, with the stock down more than 20% since the market opened.