Former President Donald Trump’s social media platform, Truth Social, is set to make its debut as a publicly traded company on Tuesday, March 26, 2024. The platform, launched by Trump Media & Technology Group (TMTG) in February 2022, will trade under the ticker symbol “DJT” on the Nasdaq stock exchange following a successful merger with Digital World Acquisition Corp. (DWAC), a special purpose acquisition company (SPAC).
Background on Truth Social
Truth Social was created as an alternative platform championing “free speech” and quickly gained traction among Trump supporters. However, the platform has struggled to attract a wider audience, with an estimated 5 million active users compared to established social media giants like Twitter and Facebook, which boast hundreds of millions of users.
| Platform | Active Users (millions) |
|---|---|
| 396 | |
| 2,910 | |
| Truth Social | 5 |
SPAC Merger and Public Debut Details
The merger with DWAC, approved by shareholders on March 24, 2024, grants TMTG access to over $300 million raised by the SPAC from investors. Based on DWAC’s current stock price, the merged company is expected to debut with a market value of approximately $5-6 billion.
| Key Merger Details | Value |
|---|---|
| Capital Raised by DWAC | $300+ million |
| Expected Market Value | $5-6 billion |
| Trump’s Potential Ownership Value | $3 billion |
Financial Implications and Challenges for Truth Social
Despite the lofty valuation, TMTG has faced financial struggles since its launch. In the first nine months of 2023, the company generated only $3.3 million in revenue while accumulating tens of millions in losses. As a public company, TMTG will face increased scrutiny and be required to disclose more financial details and material news.
Meme Stock Behaviour and Analyst Skepticism
DWAC’s stock has exhibited characteristics of a “meme stock,” with prices surging based on online hype and speculation surrounding Trump’s political prospects rather than business fundamentals. Many analysts believe the valuation is significantly inflated and disconnected from the company’s actual financial performance and growth potential.
Financial Struggles and Challenges
Despite the successful merger and impending public debut, Trump Media & Technology Group (TMTG) has faced significant financial struggles. According to regulatory filings, the company lost $49 million in the first nine months of 2023, generating only $3.4 million in revenue while incurring $37.7 million in interest expenses.
| Financial Metric | Value |
|---|---|
| Net Loss (First 9 Months of 2023) | $49 million |
| Revenue (First 9 Months of 2023) | $3.4 million |
| Interest Expenses (First 9 Months of 2023) | $37.7 million |
Experts have expressed skepticism about the company’s valuation, with Jay Ritter, an IPO specialist at the University of Florida’s Warrington College of Business, stating, “It’s losing money, there’s no way the company is worth anything like what the stock price suggests.”
Regulatory Scrutiny and Investigations
TMTG and the merger deal have faced regulatory scrutiny and investigations. In October 2022, Will Wilkerson, a senior employee at TMTG, filed a whistleblower complaint with the Securities and Exchange Commission (SEC), alleging that the company made “fraudulent representations” in violation of federal securities laws. The SEC eventually approved the merger proposal in February 2024.
Lawsuit from Co-Founders
In February 2024, TMTG’s co-founders, Andy Litinsky and Wes Moss, both former Apprentice contestants and shareholders in the company, sued TMTG, claiming that the company devised a scheme to dilute their shares. The lawsuit alleges that TMTG needed to abide by a 2021 agreement granting the co-founders the ability to appoint directors to the company’s board and other financial incentives.
Risks and Uncertainties
As a public company, TMTG will be required to disclose more details about its finances and operations. Digital World Acquisition Corp.’s regulatory filings have listed many of the risks its investors face, as well as those of TMTG once it goes public. These risks include:
- Trump’s ability to vote his shares in his own interest, which may not always align with the interests of all shareholders
- The high rate of failure for new social media platforms
- TMTG’s expectation that it will continue to lose money on its operations “for the foreseeable future”
Future Outlook and Potential Impact
The newly public company will need to demonstrate significant user growth, engagement, and a path to profitability to justify its valuation and attract advertisers. Trump’s popularity could potentially boost his net worth, even if the stock price declines from current levels over time. However, Truth Social faces stiff competition from established social media platforms and will serve as a test case for partisan-focused platforms in an increasingly polarized environment.
Challenges and Uncertainties
- Controversial content moderation decisions and accusations of censorship
- Intense competition from established social media platforms
- Uncertain path to profitability and long-term viability
As Truth Social begins its journey as a publicly traded company, investors and industry experts will closely monitor its financial disclosures, user growth, and overall performance. The platform’s success or failure could have significant implications for Trump’s fortune and the future of partisan-focused social media platforms.
For more information on the Truth Social SPAC merger and its potential impact, visit:
