Trump could get $3.5 billion if Truth Social goes public

Former President Donald Trump plans to take his social media platform Truth Social public. Chip Somodevilla

The man who rose to the White House on the back of his prolific, if controversial, use of social media is now prepared to use it to extract a huge payday for himself.

Former President Donald Trump's social media platform, Truth Social, is preparing to go public at a current valuation of $6 billion. Trump himself would own about 60% of Truth Social if it went public, which would ultimately net him a potential $3.5 billion.

On Friday, Truth Social shareholders will vote on whether to merge with a special purpose acquisition company (SPAC) called Digital World Acquisition. The vote is almost certain to pass given the high rating.

The deal has been in the works for two years and has encountered several hurdles along the way, including… Allegations of insider trading— but now it can finally come to fruition. Supported by Trump Avid supportersIt appears that the deal will bring huge gains to the former president as well as him Liquidity And net value It is now in doubt that he must pay hundreds of millions of dollars after losing two civil court cases in New York. The civil fraud case brought by New York Attorney General Letitia James ordered Trump to pay $454 million in bonds by Monday. While in January, a judge ruled that Trump must pay writer E. Jane Carroll 83 million dollars To defame her.

The massive valuation hovering over Truth Social doesn't necessarily match its financials. It is the result of strong online support from its owner.

Social fact “seems to be a Mimi says Michael Klausner, a law and business professor at Stanford University who has sued SPACs in the past for misleading investors.

Since its inception in October 2021, DWAC stock has risen 324%. Recently, as it became increasingly clear that Truth Social was going public, the stock price rose 60% over an 11-day period in late January. As if to illustrate the connection between Trump's political prospects and trade ties, the stock rose when he took office He won the Iowa primary And when Florida Governor Ron DeSantis Oo droppedt of the Republican primaries. So far this year shares are up 133% as the prospect of a SPAC merger, and subsequent IPO, looms.

Lots of high ratings are Supported by Trump voters Eager to supports Their candidate is not only at the polls but in his latest business venture.

“Truth Social stock is trading in the stratosphere,” Klausner says. “Eventually, its stock price will fall to reflect its economics, which look bad at this point at least.”

Like most tech startups seeking to go public, Truth Social isn't turning a profit. Loss of $31.6 million Until the third quarter of 2023. However, its revenues are also almost non-existent, which is a bit of a concern for any company (outside biotech) that wants to reach the public markets. In the third quarter of 2023, the company generated revenue of only $1.1 million.

As a social media app, Truth Social has approx 8.9 million registered accountsPale numbers compared to the major platforms that dominate the industry. (Facebook, for example, has more than 3 billion users.) As a startup, it outperforms other niche platforms that have acquired it, such as Truth Social Press coverage Which exceeds its size. Bluesky, launched by Twitter founder Jack Dorsey, has approx 4 million Total subscriptions, and Mastodon, another Replacement X wannabe, had it 2.3 million As of October.

The enthusiasm and fervor behind Truth Social recalls some of the most frenetic meme moments to ever sweep the internet.

None was more famous than the widely covered Gamestop fiasco when retail investors on Reddit held on to the stock, sending its price soaring, while mainstream institutional investors loved hedge funds. fort And Melvin Capital That was shortened. Ultimately, the stock kept rising because these retail investors — everyday people — built a social media frenzy around Gamestop to the point where they kept buying the stock and refused to sell, sending its price soaring. Meanwhile, none of Gamestop's financial performance justified the astronomical stock price charged to it.

This time around, individual investors seem willing to do the same, but perhaps less because of the online trend, and more because of the presidential candidate inspiring massive amounts of loyalty among his followers.

Trump, who has a portfolio of businesses ranging from steaks to country clubs to NFTs to his name, has found success parlaying his political reputation into a hungry customer base. His NFT collection, Trump Digital Trading Cards, sold out in less than a day. A line of shiny gold sneakers with red soles, dubbed “The Never Surrender High-Top Sneaker” and priced at $399, went even faster, selling out within a few hours.

But investors should already be wary of the risks of investing in the stock market, and perhaps even more so with Trump's digital venture. Just one month after its first sale, the value of Trump's NFT has already dropped by 99%.