Just in:Trump loses $1.3 billion in net worth after the worst-ever day for his social media stock

After a ridiculous spike over the past five weeks that had absolutely nothing to do with the company’s actual business, former President Donald Trump’s social media stock is suffering a sudden setback.

Truth Social owner Trump Media & Technology Group’s share price plunged 22.3% on Wednesday. That marks Trump Media’s worst one-day loss since going public in March, narrowly exceeding a loss of 21.5% on April 1.

At Tuesday’s close above $51, Trump’s dominant stake in the company was valued at about $5.9 billion. By the end of trading on Wednesday, the value of Trump’s shares tumbled to $4.6 billion. That means Trump lost $1.3 billion in net worth in a single day.

It’s not clear exactly what caused the sharp reversal for Trump Media, whose share price has become a proxy for how traders think this election will turn out. Trump Media did not release any major news that would explain the nosedive.

Some traders blamed the steep selling on technical factors and a loss of momentum for what has become a meme stock.

Trump Media’s stock has been extraordinarily volatile all year. The stock does not need official corporate announcements to move dramatically higher or lower.

Until Wednesday, it had been moving in one direction: Straight up.

Between September 23 and Tuesday’s closing bell, Trump Media had quadrupled in value. That breathtaking rally has been driven by bets on Wall Street that Trump will win the White House.

The enormous gains boosted Trump Media’s value to $10.3 billion as of Tuesday’s close. That means it was briefly worth more than the implied value of X, the Elon Musk-owned social network formerly known as Twitter.

That’s despite the fact that X has about 70 million monthly active US users on iOS and Android as Truth Social, according to Similarweb data shared with CNN. That’s roughly 100 times Truth Social’s 698,000 monthly active US users.

Even Threads, Meta’s relatively new X competitor, has about 20 times the user base of Truth Social, according to Similarweb.

Trump Media’s fundamentals remain very modest for a company that is still valued at more than $8 billion.

For context, CBS owner Paramount Global, a company that Trump Media recently surpassed in market value, has brought in more than $14 billion in revenue so far this year.

But Trump Media has generated just $1.6 million of revenue this year.

“Fundamentally the valuation is a head scratcher but we have seen other meme stock narratives like AMC and GameStop on similar paths the last few years,” Dan Ives, senior equity analyst at Wedbush Securities, told CNN in an email. “Truth Social is a fraction of X and other social media platforms in terms of users but with an election a week away this stock has become a litmus test for some investors on the White House race.”

Matthew Tuttle, CEO of Tuttle Capital Management, blamed Wednesday’s selloff on Trump Media’s share price failing to break through key resistance to the upside.

“It’s the way the game is played on this stuff,” Tuttle told CNN. “The smarter traders know you make your money and get the hell out. And leave the not-smarter traders holding the bag.”

Tuttle noted that one of the factors helping to propel Trump Media higher had been the fact that it’s very expensive to borrow shares to bet against it. He described “completely insane” financing costs to borrow shares.

“It makes it virtually impossible to short this thing,” Tuttle said.