Just keep posting.
Photo: Tasos Katopodis/Getty Images
As long as two major civil court decisions survive appeal, Donald Trump stands to lose a lot of money. In January, the former president was ordered to pay $83.3 million to E. Jean Carroll in a defamation lawsuit. On February 16, he was ordered by Judge Arthur Engoron to pay $354 million for years of net worth inflating and other business fraud at the Trump Organization. The former president remains extremely wealthy, but next year will be a great time for him to get some easy money.
That windfall may come from an unlikely place: Truth Social. In mid-February, the Securities and Exchange Commission approved a merger between the media company and a special purpose acquisition company (SPAC). It was a somewhat surprising move given the company’s history of troubled transactions.
The Washington post According to reports, Trump will own 78 million shares, or 58% to 69%, of the new company, giving him a net worth of about $4 billion. But this staggering number comes with a big caveat. That means President Trump cannot sell his shares within six months of completing his transaction. By the time he does, its value may have declined, especially given the importance of President Trump’s candidacy to Truth Social’s net worth. (On March 22nd, Digital World will hold a shareholder vote on the merger to determine how to proceed.)
The SPAC route has failed so far, largely due to SEC investigations into the accuracy of disclosures to investors. In case you forgot, since it peaked in popularity around 2021, this process involves real companies merging with shell companies and going public without the oversight of an IPO. It will be. In this case, the shell company is called Digital World Acquisition Corp., and the real company is Truth Social’s parent company, Trump Media & Technology Group. (Neither person responded to requests for comment.) SPACs don’t have a high success rate, and investors tend to lose a lot of money. The process is largely outdated, and new regulations to protect investors are making SPACs even less attractive to get-rich-quick companies.
The Truth Social story has followed a similar trajectory to many of President Trump’s failed business ventures over the years. The early days were marked by media attention and value inflation, followed by legal problems, suspicions of black money, and financial struggles. Truth Social may yet challenge that pattern. But as much as we hope Trump stays out of prison, that potential success likely depends on whether he wins the presidency again.
Amid this general downward trend, President Trump’s SPAC deal stalled. In 2022, Digital World Acquisition Corporation missed its initial listing deadline and was forced to return its $1 billion initial investment after being investigated by the SEC and unable to attract shareholders. (The SEC ultimately settled with the company for misleading investors, resulting in an $18 million fine if the merger went through.) In 2023, a separate investigation found The committee and federal prosecutors charged three of Trump’s partners with insider trading. Proposed Merger. Truth Social’s user numbers remain extremely disappointing, and its parent company, Trump Media & Technology Group, loses tens of millions of dollars in operating costs for every million ad revenue it generates, according to financial statements. In a November SEC filing, the company’s accountants said there was “significant doubt” about its continued existence. And as the September merger deadline approaches, there are no signs that SEC approval for financial disclosure to investors will be forthcoming. This is a necessary step that a SPAC needs to complete.
But signs of a possible turnaround for Truth Social began in January during the Iowa caucuses. Digital World Acquisition Corp.’s stock price soared more than 200 percent after Trump’s landslide victory in the first primary state. This suggests that retail investors see the social network as some kind of meme stock, or perhaps see some real value in the company. “After a SPAC merger is announced, essentially all the stock goes to retail investors,” says Michael Klausner, a Stanford Law School professor and SPAC skeptic. “This is also the case with Digital World Acquisition Corp. These people may think there is value in the merger, but I’m not going to take a tip from them. There is no reason to believe that we know.”
Even if the merger goes through, what kind of revival it will take will depend on what happens in November. “If he loses the election, the value of Truth Social will be very bad,” said New York University law professor Michael Ohlrogge, a fellow SPAC skeptic. After all, what good is a third-rate social media company headed by someone who has twice lost to the president? But if he wins, Truth Social’s current value may actually take hold. To do so, it is necessary for a divisive politician to win in the electoral system while four criminal cases are approaching, but strange events such as Mr. Trump’s victory in the first place also occurred. Although it is.
Another complication surfaced in late February, when the two people who originally came up with the idea for Truth Social filed a lawsuit in Delaware Chancery Court against Trump, alleging that the company was depriving them of a legitimate interest.Andy Litinski and Wes Moss were both contestants. apprentice Back in 2004, he pitched Truth Social to Trump in early 2021. The two reportedly ran day-to-day operations at Trump Media and Technology Group, which operates the site. Both men left the company in 2022 amid internal disputes and filed the lawsuit through the company they co-founded, United Atlantic Ventures.
The original agreement negotiated by Mr. Lichinsky and Mr. Moss entitled Mr. Trump to 90% of the company’s stock, and Mr. Lichinsky and Mr. Moss to 8.6%. (The rest was left to the lawyers in charge of negotiating the deal.) Their lawsuit alleges that President Trump sought to increase the number of authorized shares from 120 million to 1 billion shares in a so-called “eleventh-hour merger.” He claims that he is carrying out “manipulations by former companies.” He plans to transfer many of the additional shares to “himself and/or his colleagues and children,” ultimately reducing the amount that Mr. Liczynski and Mr. Moss will receive to 1 percent.
According to Washington postDigital World gave a nod to the possibility of lawsuits from UAVs in its SEC filing, noting that a lawsuit could occur.
“It would have a negative impact on investor confidence and market perception.” There was also the possibility that the crucial March 22 shareholder vote would be delayed.
However, on March 9, the threat of litigation appeared to disappear when the two sides reached a preliminary agreement during a hearing in Delaware Chancery Court.around new york times, the deal “preserves the two founders’ rights to a significant stake in Truth Social’s parent company until the judge hears further arguments on the merits of the case,” said presiding judge Sam Glasscock III. The deputy presiding judge appeared to have no intention of postponing the March 22 voting date, saying, “No one has suggested that I should do anything to prevent the session from adjourning,” and later announced that He said so. We’re pretty confident that we can work something out. ”
Like President Trump’s other assets, Truth Social’s actual value is difficult to parse. Two years ago, Trump Media & Technology Group was on paper Trump’s most valuable asset, with its stock valued at $730 million.Those values were crucial to President Trump’s return. forbes List of the 400 richest people on earth. But Ohlrogge points out that SPACs often inflate their value to offset the high costs of going public. “There’s a big concern that President Trump’s media companies are inflating their own reputations,” he says. President Trump’s accountant feels the same way. In disclosures to the Federal Election Commission last year, Mr. Trump valued his holdings in Truth Social at between $5 million and $25 million, less than the $1 billion he expected to receive from the merger. It’s far from profitable.
The fact that Mr. Trump is still able to extract money from his lackluster social network answers the common question: “Why doesn’t he go back to X?” He used to be very fond of the app formerly known as Twitter. Anyone who has used Truth Social knows that he basically ripped it off.And despite X’s growing number of flaws, its audience Estimated number of monthly users is an order of magnitude larger than Truth Social, about 600,000 versus 500 million.
There appears to be a trivial reason for Trump’s refusal to return. Trump no longer needs it because X’s status has declined. Combatant posts on Truth Social generally make the news. He’s not physically a guy who likes to crawl back up. Thanks to his parties, he’s gotten used to being the one being crawled to. It also appears that President Trump has not resolved his two-year-old dispute with Company X owner Elon Musk. Musk called Twitter “worthless” and mocked Musk’s dependence on federal support for Tesla and SpaceX. “I could have said ‘beg on my knees,’ and that’s what he would have done,” Trump wrote on Truth Social, referring to a conversation in which Musk claims he asked for government support for the project. .
But there are also contractual reasons for Trump’s loyalty to Truth Social. A January SEC filing states that President Trump is obligated to first post content to Truth Social six hours before taking it elsewhere, a provision that will remain in place for as long as Truth Social exists. Continuing “forever”. Trump isn’t known for honoring his contracts, but here’s a compelling reason to do so. If he goes back to his X, the value left in the app will plummet. His dream of becoming even richer just by posting ends.