Reddit, Trump Media, and the Return of Meme Stocks | Pivot

Kara Swisher and Scott Galloway discuss how Reddit and Trump Media stocks are performing, following their successful debuts as public companies. Will Reddit be able to maintain its value? Will Trump Media be more than a meme stock? #pivot #podcast #reddit #trumpmedia #truthsocial #ipos

Kara SwisherhostScott Gallowayhost

Mar 29, 20248mWatch on YouTube ↗

EVERY SPOKEN WORD

20 min read · 3,525 words

0:00 – 0:43
Reddit IPO pops; Trump Media spikes as meme stock déjà vu
1. KSKara Swisher
  We called it. S- or, "Reddit's IPO is a victory. Shares of the company are up 15% at the time of taping after jumping 48% on the first trading day. The market, uh, Reddit's market cap is currently over $9 billion." Uh, another thing we called, "Trump Media is a meme stock. Shares in the company jumped over 50% in the first minutes of trading, causing a brief volatility pause. Trump Media is trading at a market cap of almost $8 billion." Uh, the company made just $3.4 million in the first nine months of 2023, which is... And they lost a ton of money. They're losing, um, they're down 39% in users. It's just a, it's a scam of some sort. It's just a, it's a Ponzi sch- I don't know, what's the word you would use? Um, so talk about Reddit first, and then, uh, Trump Media stock.
0:43 – 1:13
Why Reddit’s IPO worked: traffic scale + money on the sidelines
1. SGScott Galloway
  Uh, we called this. They're... Reddit, uh, most trafficked site in America that's not owned by Alphabet. Incr- terrible monetization of that traffic, but at the same time that represents the opportunity. And, uh, there's also a ton of money on the sidelines. It just, all the moons lined up. I, uh, you just, you could just feel this thing was gonna get a big pop. And also, there's this very strange dynamic in the IPO market where it now makes sense for the company to price below the actual value they could get, such that,
1:13 – 1:44
The IPO pricing 'racket': intentional underpricing as a branding event
1. SGScott Galloway
  uh... Because here's the thing. We're talking about the fact that it was up 48%. That's, it's the only time you have this branding event to be kind of the most successful, or one of the more successful IPOs of the year. And people say, "Well, they left money on the table 'cause they could have priced it higher." When you're talking about a float of 20%, maybe you lose 2% of the company, but to be one of the most successful IPOs of the year and set the tone for your company, it's worth the dilution. So, this is the racket, and it is a racket. The investment banks say, "Price it below what it's worth,
1:44 – 2:24
Retail investors left behind: IPO access and wealth transfer
1. SGScott Galloway
  and it's good branding, it creates nice momentum, nice halo for you, you only give up a little bit of dilution. And we, the investment bank, get to essentially give free money to our institutional clients who generate fees for us." Now, the unfortunate thing is the average retail investor doesn't get to participate. They have to buy it at 47 bucks, even though it priced at 34, I think.
2. KSKara Swisher
  Mm-hmm. Mm-hmm.
3. SGScott Galloway
  So, it's a racket. It's another example of a transfer of wealth from lower-middle-income homes to institutions and rich people, or people with access. Some people would argue, "Well, Vanguard, Blackstone have a lot of money from firemen and teachers, and they get to participate." But be clear, the IPO market is an insider game, and it is a bit of a fixed racket.
2:24 – 2:57
What matters next for Reddit: prove monetization or the stock resets
1. KSKara Swisher
  Yeah. Yeah. Where's it gonna go from here? I think they'll just have to... Now, they'll be on the basics of what their business is like going forward.
2. SGScott Galloway
  There's only one thing that matters from this point forward. Right now, it's o-
3. KSKara Swisher
  Mm-hmm.
4. SGScott Galloway
  Right now, on its basic numbers and its growth, it's overvalued. If they show any momentum, that they are able to better monetize that Niagara Falls of traffic, the stock will go up from here. If they do not show momentum around monetization of their traffic, it's gonna go way down. It's... All I can tell you is, in a year, the stock will not be here.
5. KSKara Swisher
  Yeah.
6. SGScott Galloway
  But global brand-
2:57 – 3:40
Reddit vs. Snap: traffic is harder than product polish
1. KSKara Swisher
  Yeah, I would agree. I think they've got it. It's gonna be in the... But it's still a very sm- it's very Snapchatty. It feels very Snapchatty and very great, a good product. We'll see if they can n- look, like, better than what it is. I, I, I like the people who run it and it's still small. It's still a very small social media site.
2. SGScott Galloway
  But, but the-
3. KSKara Swisher
  We'll see.
4. SGScott Galloway
  ... the contrast with Snap is Snap had much better user interface-
5. KSKara Swisher
  Mm-hmm.
6. SGScott Galloway
  ... in my opinion, was probably more innovative.
7. KSKara Swisher
  Mm-hmm.
8. SGScott Galloway
  Great, better monetization, but didn't have nearly the traffic-
9. KSKara Swisher
  Mm-hmm.
10. SGScott Galloway
  ... of Reddit.
11. KSKara Swisher
  Mm-hmm.
12. SGScott Galloway
  And I think the market is deciding that the harder part is to get the traffic.
13. KSKara Swisher
  Okay.
14. SGScott Galloway
  That you can probably figure out the other stuff, 'cause this is trading... I mean, this is trading at a rich valuation. Now, as a segue to Truth Social-
15. KSKara Swisher
  Mm-hmm.
3:40 – 4:27
Valuation reality check: NVIDIA hype vs. Truth Social absurdity
1. SGScott Galloway
  Okay, let's talk about NVIDIA. NVIDIA is arguably the eye of the storm for hype around AI, and it's trading at 37 times sales. Oh my God, that's insane, right? 37 times sales. Reddit's trading at 11 times. So, 11 for Reddit, digital media, potential huge growth, we'll see. Uh, NVIDIA, arguably hottest company in the world, 11,000 people turn out (laughs) like-
2. KSKara Swisher
  Mm-hmm.
3. SGScott Galloway
  ... like a Justin Bieber concert or a bands like concert at the San Jose Stadium to see Jensen Huang speak, The Financialization, the, uh, idolatry of innovators and billionaires. Anyways, that's trading at 37 times sales. Truth Social is trading at 1,500 times sales. I mean-
4. KSKara Swisher
  Uh.
5. SGScott Galloway
  ... you wanna talk about (laughs) a company that is Jenga or a house of, house of cards?
6. KSKara Swisher
  Mm-hmm. Yeah.
4:27 – 4:33
Not financial advice: why meme stocks are unpredictable and dangerous
1. SGScott Galloway
  Uh, and by the way, not financial advice. I would not get near this thing 'cause you don't know what will happen, 'cause this is, has nothing to do with the fundamentals.
4:33 – 5:35
Kara’s corruption and enforcement concerns: 'violation in real time'
1. KSKara Swisher
  'Cause you don't know if their followers are gonna do... It's all based on his followers, and if they're gonna keep it up, they're gonna keep handing him money. It's also a very deft way to give him money, right, if he's gonna sell it, is to keep... It's, it's a really complex way to give him money, but he, he, you know, they're trying... It's all Trump fans, and it's gonna be Trump, uh, donator, people who wanna donate in a different way, um, just to keep it going. And there's all these rumors that he's getting people to keep it going, you know, by buying... All you have to buy is just a little bit to keep the stock in a crazy zone. You don't have to buy that much. Um, and, uh, and that there's all kinds of games happening here. I think this is an SEC violation happening in real time right now, and I think it's a shareholder lawsuit situation. And it's a s- it's a scam of some sort. It's a, it's not even a scam. What is it? It's a, it's a meme stock. It's a meme stock.
2. SGScott Galloway
  Yeah, it's a meme stock. That's right.
3. KSKara Swisher
  But it's the meme-iest meme stock of, in Memeville, as one of the reporters called it. And it, just stay away. Even shorting it is a very dangerous situation, correct? I mean, because you could get squeezed.
4. SGScott Galloway
  Uh, uh, my advice to anyone here is not to get near this thing.
5. KSKara Swisher
  Yeah.
5:35 – 6:41
Meme stocks vs. Trump Media: even AMC/GameStop had real revenue
1. SGScott Galloway
  Because it's not trading... It's, it's just unknown what it's trading on. As far as we know, he calls some, someone in the Gulf and says, uh, you know, "I'll make sure that we buy oil from you. Just do me a favor, come in heavy." And you're right, there's a tail of a whip here, a small amount of, a small amount of purchases can send the stock skyrocketing. And you just don't want, you don't wanna get near this thing right now. I mean, AMC and GameStop were considered kind of the ultimate meme stocks. They're shitty businesses, but they were businesses. They were doing...Billions in revenue. You could ar- make an argument for theaters coming back, you could make an argument for GameStop getting an, I don't know, download a video game. You, you could make an argument, good, decent management, the guy from Chewy, whatever. You could make an argument there. This does three million in revenue. There's not even a... there really isn't even a business here.
2. KSKara Swisher
  This is not a business. This is something else. Yeah, he just has to call some guy and say, "Buy a million bucks, buy a million bucks here." Um, and it's like, it's like the cost of doing business for people if he becomes president. That's really it. It's, it's a, it's so corrupt. It's so crazy corrupt. Um, and it's right in Trump's name.
3. SGScott Galloway
  It's just gonna be very interesting what happens.
4. KSKara Swisher
  Yeah.
6:41 – 7:04
Governance red flags: board composition and lockup changes
1. SGScott Galloway
  The board is his son, Devin-
2. KSKara Swisher
  Yep.
3. SGScott Galloway
  ... and then who is it? It's another-
4. KSKara Swisher
  Devin Nunes, his son, another one, uh, they're all his friends. And so it's just-
5. SGScott Galloway
  Oh, oh, uh, Linda McMahon.
6. KSKara Swisher
  Yeah, another one.
7. SGScott Galloway
  This makes, this makes Tesla's board look like a model of corporate governance.
8. KSKara Swisher
  Yeah. It's true. Right.
9. SGScott Galloway
  And they can, they can announce, "We've decided to-"
10. KSKara Swisher
  Yeah.
11. SGScott Galloway
  "... uh, reduce his lockup period or eliminate it," and he can sell shares right away.
12. KSKara Swisher
  Yeah.
7:04 – 8:15
The key question: when can Trump sell, and what happens when he does?
1. SGScott Galloway
  They will have to disclose that, but it'll be really interesting as what happens (laughs) to the stock if and when it's disclosed or we get close to any date where he can sell, because my guess is he's using that stock, and I don't know if he has to disclose this, to guarantee, uh, his ability to raise the $175 million he has now. But this guy is gonna sell most or all of it 'cause he's gonna look and go, "There's nothing here." There's, he's gonna decide, he's gonna, he knows there's nothing there, and then the, what happened with the meme stocks is everyone together they say, "Let's take over the castle. We can do it. We can kill these short sellers." And they do it, and then they look at each other-
2. KSKara Swisher
  Mm-hmm.
3. SGScott Galloway
  ... and they fall asleep, and they go, "I need to get out of here before there's a rush out the door."
4. KSKara Swisher
  That's right, of the other guys.
5. SGScott Galloway
  And they're all looking at each other, and there's only one person they're looking at here, and it's the following: When can Donald Trump sell?
6. KSKara Swisher
  Mm-hmm. Mm-hmm. And when does he sell? I, I, I just feel this is gonna be so, uh, this is gonna be such a case. It's his, it's his next criminal case or his next civil case, um, where he's gonna be sued for doing whatever he's doing. There'll be emails everywhere 'cause they're so cloddish with their corruption.