In a surprising turn of events, the parent company of former President Trump's Truth Social platform, Trump Media & Technology Group, defied expectations as its stock soared in its first week on the stock market. The company's stock closed at roughly $62 per share on Thursday, indicating a strong performance after a week of volatile trading.

The surge in Trump Media stock follows the merger between the company and Digital World Acquisition Corp. (DWAC), a "blank check" company. The newly combined firm's stock, DWAC, closed at $49.99 per share the day before the merger's completion. Throughout its first week on the market, Trump Media shares reached as high as $79.38 before settling near $62 on Thursday.

As a result of this impressive performance, Trump Media's market capitalization reached approximately $8.4 billion as of Thursday, according to CNBC data. However, the financials of the Truth Social parent raise concerns, as regulatory filings reveal that the company generated only $3.4 million in revenue in the first nine months of 2023. Additionally, it posted a net loss of $49 million during the same period.

Experts have categorized Trump Media as a "meme stock" due to the significant disparity between its strong market debut and its financial realities. They argue that the enthusiasm surrounding the former president appears to be a central driving force behind the stock's success. Thomas Hayes, the chair and managing member of Great Hill Capital, emphasized this point, stating that the stock's performance is "a proxy on support for Donald Trump and nothing more."

Jay Ritter, a finance professor at the University of Florida, estimates that Trump Media stock is actually worth around $2 per share, based on the $300 million infusion from the DWAC merger. Nevertheless, Trump Media's market performance remains substantial, and the former president owns 78,750,000 shares of the company, worth nearly $4.9 billion based on the closing price on Thursday.

The merger with DWAC marks a significant victory for Trump and his media company, which has faced setbacks and regulatory scrutiny in recent years. Trump Media now aims to expand and enhance the Truth Social platform while championing free speech rights for its users.

The fervent support that Trump garners from his followers aligns closely with the characteristics of a meme stock. Steve Sosnick, the chief strategist at Interactive Brokers, referred to this support as a "quasi-religious fervor" necessary to fuel such stocks. Meme stocks gained popularity in 2021 when Reddit users rallied to buy shares of companies like GameStop, AMC Entertainment, BlackBerry, and Bed, Bath & Beyond.

The rally behind Trump Media stems from a desire to support the former president, particularly among his devoted base. Thomas Hayes highlighted the significance of this support, stating that buying shares in the company remains an effective means for Trump supporters to show their allegiance until the election period.

However, financial challenges await Trump as he prepares for a potential rematch with President Biden in November. Trump's fundraising efforts have fallen significantly behind Biden's, with the former president's main committees raising only $13.8 million in the first few months of 2024. Trump's leadership PAC, Save America, has also faced mounting legal fees, with over $8 million spent on legal consulting during the first two months of 2024 alone.

Despite the recent surge in Trump Media's stock, caution remains necessary. The stock's value may be detached from its market price, and betting against the loyalty of Trump's supporters is seen as a risky move by experts. Nevertheless, meme stocks have proven to defy expectations and sustain overvalued levels for extended periods, as seen with GameStop's staggering price-to-earnings ratio.

As Trump's campaign works to close the fundraising gap and navigate legal challenges, the future trajectory of Trump Media's stock remains uncertain. The company's market debut has highlighted the unwavering support among Trump's base and their investment in his message.