Reid Hoffman knows firsthand that riches can be made building a social media empire. But the LinkedIn co-founder is dumbfounded by the size of the social media fortune former President Donald Trump is sitting on.

Trump’s conservative social media company, Truth Social owner Trump Media & Technology Group, is valued by Wall Street at a whopping $6 billion — even after a recent plunge in its share price.

“That is wildly high,” Hoffman, who is now a director at Microsoft and a venture capital investor, told CNN. “The Truth Social numbers are so absurdly out of the realm of normal business.”

Shares of Trump Media (DJT) spiked more than 20% on Monday, its second-best day since it started trading on the Nasdaq in late March.

Unlike social media site LinkedIn, which reached a deal to be sold to Microsoft in 2016 for $26 billion, Trump Media generates little revenue and remains a tiny player in the industry.

Truth Social’s user count is dwarfed by Reddit, Elon Musk’s X (formerly Twitter) and even Instagram’s Threads.

In 2023, Trump Media brought in just $4.1 million in revenue. That means Wall Street is assigning an astronomical price-to-sales ratio of more than 1,400 based on trailing revenue.

By comparison, Wall Street values social media leader Meta Platforms, the owner of Facebook and Instagram, at just nine times trailing revenue.

Hoffman, who has been a vocal critic of Trump, noted that if Meta sported a price-to-sales ratio like Trump Media’s, it would be valued at more than $150 trillion (instead of its current market value of $1.3 trillion).

“Trump Media is probably more appropriately valued close to $40 million rather than several billion,” Hoffman said. “Truth Social is burning through hundreds of millions of dollars with nothing to show for it in user engagement, user growth or even potential revenue.”

Trump Media did not respond to CNN’s request for comment.

Trump Media’s share price started to fall sharply after May 30 when Trump — the company’s chairman and leading shareholder — was convicted of 34 felony counts in a hush money trial. The company’s market value crumbled by half between May 30 and last week before bouncing back Monday.

In an SEC filing, Trump Media disclosed Monday it expects to raise more than $69 million in proceeds from investors exercising warrants to buy common stock.

Trump’s stake is worth nearly $4 billion

Hoffman is hardly the first to express disbelief at the valuation of Trump Media.

Some experts have described Trump Media as a “meme stock,” like GameStop and AMC. (Meme stocks typically trade more on hype and social media sentiment than fundamentals.)

Jay Ritter, a finance professor at the University of Florida who has studied capital markets for four decades, told CNN last week that Trump Media’s share price is still “wildly overpriced.”

Billionaire media mogul Barry Diller, who sits on the boards of Expedia, Coca-Cola and MGM Resorts International, told CNBC that Trump Media is a “scam” and people buying its shares are “dopes.”

And yet the market has consistently been valuing Trump Media in the billions of dollars.

That lofty valuation has catapulted the net worth of Trump, the company’s dominant shareholder.

Based on Monday’s share price, Trump’s 114.75 million shares in Trump Media are valued at nearly $4 billion. That’s down from $6 billion as recently as May 30 but up from $3 billion late last week.

Why Trump Media is worth so much

Hoffman has some theories as to why some investors are “holding on to the stock in spite of the underlying business’s very glaring deficiencies.”

He told CNN that Trump Media’s share price is likely being propped up by “gullible money from day traders who support Trump personally” and by a “bet that Trump will win the White House, causing the stock to spike.”

Indeed, analysts have previously told CNN that Trump Media has become a way to bet on Trump’s political fortunes and the idea that early next year Truth Social could be the main platform for presidential communication.

Hoffman speculated that “deep pockets” such as wealthy individuals or even governments are holding onto their Trump Media shares to “artificially prop up” the value of Trump’s stake.