On the eve of the election, the "Trump Trade Barometer" collapsed

With three days left until the U.S. presidential election, the "Trump trade" has taken a sharp turn, leading to a plunge in the stock of Trump's social media company and severely reducing his net worth.

After a 22% drop on Wednesday and a 12% drop on Thursday, the stock price of Truth Social's parent company, Trump Media & Tech (DJT), fell another 14% on Friday, cumulatively plummeting 36% over three trading days, with a market value evaporating by over $4 billion.

After the market closed on Tuesday, Trump's majority stake in the company was valued at approximately $5.9 billion, but by Friday's close, this figure had shrunk by $2.4 billion to $3.5 billion.

As the biggest barometer of the Trump trade, the plummeting DJT stock price signifies a 180-degree reversal in market pricing—from betting on Trump to betting on Harris.

Nevertheless, current polls clearly indicate that the race is too close to call, with competition nearly at a standstill. Polls in key battleground states like Pennsylvania, Michigan, and Wisconsin, which could determine the election's fate, also show a very narrow gap between the two candidates.

Trump's Odds Decrease, DJT Has No Reason to Rise

DJT has not released any significant news to explain the stock price drop. Steve Sosnick, chief strategist at Interactive Brokers, pointed out, "Meme stocks like DJT are easily influenced by changes in momentum."

Earlier this week, he noted in an interview with Yahoo Finance that there has been a noticeable "shift in sentiment" in the betting markets in recent days: last week’s market surge was good news for DJT; conversely, if the market changes, the stock price will fall.

"Remember, this stock is essentially a binary, leveraged election bet," Sosnick said. "If he wins, there’s a reason to increase its value. If he loses, it becomes a company with thin revenues and almost no profits."

Previously, calls for Trump to return to the White House were high, with prediction sites like Polymarket, PredictIt, and Kalshi showing that Trump's chances of winning the presidential election were higher than Harris's.

This expectation drove DJT's stock price to quadruple from September 23 to Tuesday's close, inflating its market value to $10.3 billion, making Truth Social's valuation briefly exceed $1 billion, even surpassing the implied valuation of Musk's social network platform X. Fidelity Investments valued X at $900 million in its latest regulatory filings.

After three days of plummeting stock prices, DJT's market value has shrunk to $6.1 billion. Meanwhile, the fundamentals of DJT remain very mild, unable to support the company's stock price.

In August, DJT reported its second-quarter (ending June 30) results, showing a net loss of $16.4 million, with about half related to the company's SPAC transaction costs. Additionally, the company's second-quarter revenue was slightly below $837,000, a year-on-year decline of 30% At the beginning of this month, the company revealed that its Chief Operating Officer had resigned in September