Donald J. Trump has a long history of business failures and bankruptcies.
However, after being banned from Twitter in 2021, he launched the social media site Truth Social.
His potential Twitter rival, Truth Social, is a risky, speculative venture with few hard numbers to back it up. Even though he’s just getting off the ground, he’s already the subject of subpoenas from regulators and a grand jury. Oh, and Trump won’t need to use social media sites much, if at all, to communicate with the public, especially if voters return him to the White House. Buying his stock is at your own risk.
That’s not what I’m talking about. It’s…um…Truth Social’s new stock market prospectus. It has just been filed with the U.S. Securities and Exchange Commission.
In case you missed it, Donald Trump is going back to Wall Street.
He led negotiations to list Truth Social on the stock market by merging Truth Social’s parent company, Trump Media & Technology Group, with publicly traded shell company Digital World Acquisition Corporation. ing.
DWAC
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look: DWAC soars more than 15% on Trump Media & Technology Group acquisition, but here’s a potential roadblock
Not only does Trump have to manage his presidential campaign, he also faces mounting legal challenges. Meanwhile, Digital World has had issues with the Securities and Exchange Commission, recently agreeing to pay $18 million to settle fraud charges related to this potential merger.
But don’t worry about all this. As President Trump moves toward winning the Republican presidential nomination for the third consecutive year, the stock price of Digital World Acquisition Corporation is suddenly soaring. The company’s stock price has tripled since January’s Iowa caucuses to $48, giving it a potential value of $6.5 billion.
opinion: Cha-ching!Trump has earned $4 billion from his campaign.
However, the prospectus for this deal is staggering at nearly 600 pages.
This reveals all the reasons why investors jumping on the MAGA train should think twice or even three times before taking the plunge.
“A number of companies with ties to President Trump have filed for bankruptcy,” the prospectus reminds investors. “There is no guarantee that TMTG will not fail. … Many companies that had licensing agreements with President Trump have gone bankrupt. There is no guarantee that TMTG will not fail either.”
In case you forgot, the stock market prospectus states that the Trump Taj Mahal, built and owned by President Trump, filed for Chapter 11 bankruptcy in 1991. It is written. “Trump Plaza, Trump Castle, and Plaza Hotel, owned by President Trump at the time, filed for Chapter 11 bankruptcy protection in 1992.”
Trump Hotels & Casino Resorts, which Trump founded in 1995, “filed for Chapter 11 bankruptcy protection in 2004,” the article continues. “Trump Entertainment Resorts, the new name given to Trump Hotels and Casino Resorts after its 2004 bankruptcy, was declared bankrupt in 2009.”
You know what gamblers say: “The house always wins”? Well, Donald Trump and his failed casino operations are your rebuttal.
Trump Hotels and Casino Resorts also ran into legal trouble during its decommissioning process. “On January 16, 2002, the SEC issued a cease and desist order against Trump Hotels & Casino Resorts, Inc. (THCR) for violating the anti-fraud provisions of the Exchange Act,” the prospectus reveals. There is.
I’ve written about the Trump Hotel & Casino Resort before. General investors, drawn to the stock by the allure of Trump’s name, ended up taking off their shirts, pants, and shoes, and were left in their underwear on the Atlantic City boardwalk.
Yes, Trump himself pocketed millions of dollars. Shareholders lost almost everything.
From the archive (July 2015): Donald Trump wreaked havoc on the stock market
Also read (March 2016): Donald Trump’s business disaster is worse than you think
“Trump Shuttle, founded by President Trump in 1989, defaulted on its loan in 1990 and was defunct by 1992,” the prospectus continues, referring to the short-haul airline. “Trump University, founded by President Trump in 2005, ceased operations in 2011 amid ongoing litigation and investigations into the company’s business practices.”
Just to be clear, this is not what the fake news liberal media is talking about. This is the stock market prospectus for Trump’s own current business.
“Trump Vodka is a brand of vodka manufactured by Drinks Americas under license from the Trump Organization, introduced in 2005 and discontinued in 2011.” “Trump Mortgage, LLC, a financial services company founded by President Trump in 2006, ceased operations in 2007. GoTrump.com, a travel site founded by President Trump in 2006, ceased operations in 2007. Trump Steak Brands such as Trump Steak went out of business in 2007. The meat shop, founded by President Trump in 2007, ceased sales two months after its launch.” 2 months.
But Truth Social is different, right?
The prospectus also has a long section listing all of the former president’s current legal problems (though he avoided using that word). former). You’ll always know you’re buying a blue-chip stock if the prospectus reads like a police blotter.
Then there’s the Truth Social deal itself.
Trump Technology & Media Group “seeks to build a media and technology powerhouse that rivals the Liberal Media Consortium and promotes freedom of expression,” the prospectus says.
Total Truth How many social sign-ups have we had so far? Well…8.9 million.
In the nine months to September 2023, the company suffered an operating loss of $10.6 million on revenue of just $3.4 million.
Meanwhile, somehow. Interest expense amounted to $37.7 million.
If you want to know the financial details about Truth Social before investing, you’re not alone. Potential merger partner Digital World’s board also acknowledged that it wanted more financial details.
Sadly, Trump’s companies “failed to provide TMTG’s financial projections to the Digital World Board in connection with the Digital World Board’s bankruptcy due diligence process,” the board revealed.
I have no choice. You can’t have it all.
Part of the reason is that the people running Truth Social, led by CEO Devin Nunes, a former pro-Trump congressman from rural south-central California, don’t actually have that much data. Maybe. “[I]Investors should be aware that since its inception, TMTG has not relied on certain key performance indicators to make business or operational decisions,” the prospectus reports. “As a result, no internal controls or procedures were maintained to collect such information on a regular basis; If any” My italics.
Operation Trump is Was chosen Avoid tracking these metrics. “At this point in its development, TMTG , which we believe could potentially deviate from its objectives.” Focuses on strategic evaluation of business progress and growth. ”
In other words, Truth Social didn’t want numbers to distract them from their business. You could call this the Alternative Facts School of Management.
But the real benefit here is that investors are buying this stock in the hopes that Donald Trump will do for Truth Social what he did for Twitter, when in reality he There is no guarantee that you will use this stock a lot or not at all. Even if he is elected president.
That’s because, as the prospectus makes clear, Donald Trump’s agreement with Truth Social is limited. Yes, he has to post some of his messages there on social media first. However, only non-political ones created from his “personal (i.e., non-business)” account. And his Truth Social exclusivity period for each post is only his 6 hours.
Oh, and Trump can also terminate the agreement with 30 days’ notice “at any time after February 2, 2025.” In other words, right after Inauguration Day.
And until then, who decides which social media posts are political and therefore exempt from exclusivity agreements? Guess.
“President Trump…may post social media communications from any personal profile that he determines.”in his sole discretion. have a political relationship Anytime, on any social media site” the prospectus warns. my italics.
It added: “As a presidential candidate, most or all of President Trump’s social media posts could be considered politically related.”
As a result, investors are being warned.There may be no meaningful treatment If President Trump minimizes his use of Truth Social. ”
Trump will own at least 58% of the new company, giving him complete control and giving minority investors nothing but hope. What could go wrong?