Is Truth Social another botched Trump business? | Donald Trump

Doing business with Donald Trump takes a brave investor.

The former president’s hotel and casino has declared bankruptcy six times. Trump’s short-lived airline crashes. He paid millions to settle multiple lawsuits over running an unlicensed “university” that conservative National Review called a “massive scam.” Then there’s the Trump Organization’s looming criminal trial for tax fraud.

Still, for those pouring money into the company behind his rival Twitter, a business built on Trump’s famous ability to anger millions online seems like a good bet.

Now that’s in trouble, too, as more than $1 billion in investment stalled amid shareholder indecision and a federal probe into whether Trump Media and Technology Group broke the law in a deal with a company that provided the money.

As with the former president, it’s unclear what happened.

Trump launched Truth Social in February throw away Twitter incited violence after he lost the presidential election. He previously ran a blog, From Donald Trump’s Desk, but it shut down in less than a month because hardly anyone was reading it.

Truth Social has fared better as a vehicle for Trump to inflame his base and anger at his enemies, and for white nationalists and other far-right figures to tweet what they can’t. But it has failed to generate the kind of reach enjoyed by other social media platforms.

Trump has about 4 million followers on Truth Social and 80 million on Twitter, in part because his influence is limited by a ban from the Google Play Store for failing to remove posts that make physical threats and incite violence.

According to data from online analytics firm Similarweb, Truth Social had just 11.5 million visits in July, compared with 7 billion for Twitter. Last month, Trump Media reported a $6.5 million loss in the first half of the year. It also reportedly owes a debt to a web hosting company.

That raises the question of whether investing in Trump’s media was a sound business decision or whether it could have been money pouring into the former president’s endless political campaign.

Michael Ohlrogge, a New York University law professor who specializes in the kind of funding Trump is now seeking, said there is no evidence Trump Media has a strategy to become a money-making business.

“There are a lot of questions about whether this is a viable business. Will it actually make money? There are a lot of good reasons to be skeptical. It’s just something he’s slapped on very quickly,” he said.

Trump Media has been counting on a huge infusion of money from a kind of shell company that was set up just to raise money for another business by merging with it, known as a special purpose acquisition company (special purpose acquisition company). Spac).

Digital World Acquisition Corp, which launched as Spac a year ago, has not committed to investing in Trump’s media business. Shareholders are betting that their investment will increase in value when Digital World finds a company to merge with. That’s exactly what happened seven weeks later when the deal with Trump Media was announced, sending Digital World’s shares tenfold higher.

But earlier this month, shareholders failed to meet a deadline to approve the merger, costing Trump Media and Truth Social about $1.3 billion.

In addition, the SEC and federal prosecutors are blocking any merger as they investigate Trump Media’s deal with Digital World, raising questions about the speed with which they announced the merger.

Ohlrogge said the SEC may consider whether Trump struck or was close to a deal with Digital World before Spac began selling shares without informing potential investors, violating financial regulations.

“If they were already in advanced talks with Trump’s Spac and didn’t tell the original investors, then it could be a relatively obvious violation of securities laws. There are relatively good reasons to suspect that could be the case,” he said. Say.

Meanwhile, Digital World’s shares have retreated sharply, from a high of nearly $100 to about $23, although anyone buying from the IPO would still double.

Ohlrogge said it was unclear why shareholders did not approve the merger by the Sept. 8 deadline. Some may not be paying attention, he said. Others may deny approval until Trump resolves his issues with the SEC.

“The most meaningful thing for Trump’s company is to settle with the SEC, do whatever they want and try to keep them happy so they can let the merger go. Approach does not appear to be Trump’s preferred approach in most legal dealings. He appears to be fighting his teeth and nails,” he said.

Some shareholders are uneasy about the wisdom of financial deals with Trump once they find out where their money is going.

Digital World has now called an extraordinary general meeting next month, extending the deadline for approval of the merger by a year. It’s unclear how this will play out after Spac admitted earlier this year that Truth Social “may never generate any operating income or operate profitably.”

Jennifer Stromer-Ghalley, a professor at Syracuse University’s School of Information and author of “Presidential Campaigns in the Internet Age,” said Truth Social was an effective tool for Trump to keep in touch with his base, in part was amplified by a reporter writing his statement. But she questioned whether it could operate as a business beyond being a political campaign tool.

“One of Trump’s great assets has always been his name. Because of his brand, he has an immediate foundation on which Truth Social can start to expand. But then it has to expand into the past because that may not be enough for the business Keep going. I don’t see how Truth Social can expand to this very, relatively narrow core base of Trump’s main supporters,” Stromer-Galley said.

“If I were an investor in communications, media, and technology companies, I would wonder what Truth Social’s actual business is. Is that really where you want to put your money when the head of the company can’t do it for them?”

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