Is Truth Social another of Trump’s failed ventures? | donald trump

It takes a brave investor to go into business with Donald Trump.

The former president’s hotels and casinos declared themselves bankrupt six times. Trump’s short-lived airline crashed. He has shelled out millions of dollars to settle multiple lawsuits for running an unlicensed “university” that the conservative National Review called a “massive rip-off.” And then there is the impending criminal trial of the Trump Organization for tax evasion.

For all of this, a company built around Trump’s famous ability to excite millions online must have seemed like a good bet to those who poured money into supporting the company behind his rival on Twitter, Social truth.

Now that, too, has run into trouble as more than $1 billion in investments have stalled amid shareholder hesitation and a federal probe into whether Trump Media and Technology Group broke the law in its operations. dealings with a company set up to provide the money.

As often with the former president, we do not immediately know what is happening.

Trump launched Truth Social in February after being shaken from Twitter for inciting violence after losing the presidential election. He previously ran a blog, From the Desk of Donald Trump, but it closed after less than a month because hardly anyone read it.

Truth Social has fared better as a vehicle for Trump to annoy his base and rage against his enemies, and for white nationalists and other far-right wingers to say what they can’t say on Twitter. But it failed to generate the kind of reach enjoyed by other social media platforms.

Trump has about 4 million followers on Truth Social, compared to 80 million on Twitter, in part because his reach was limited by a Google App Store ban for not removing posts making physical threats and inciting to violence.

Truth Social saw just 11.5 million visits in July, compared to Twitter’s 7 billion, according to online analytics firm Similarweb. Last month, Trump Media announced that it lost $6.5 million in the first half of this year. He would also be indebted to a web hosting company.

It has raised questions about whether investing in Trump Media is a smart business move or likely to be money thrown down the drain from the former president’s relentless political campaign.

Michael Ohlrogge, a law professor at New York University who specializes in the type of funding Trump is currently seeking, said there was no evidence that Trump Media has a strategy to become a lucrative business.

“There are a lot of questions about whether this is a viable business. Will it really make money? There are plenty of good reasons to doubt it. It’s pretty obvious it was just this thing that he put together really quickly,” he said.

Trump Media was counting on a large infusion of cash from a form of shell company created solely to raise money for another company by merging with it, known as a Special Purpose Acquisition Company (Spac).

Digital World Acquisition Corp was created as a Spac a year ago with no commitment to invest in Trump’s media business. The shareholders bet that their investment would increase in value when Digital World finds a company to merge with. That’s exactly what happened when the deal with Trump Media was announced just seven weeks later, boosting Digital World’s stock price tenfold.

But earlier this month, shareholders missed the merger approval deadline, robbing Trump Media and Truth Social of about $1.3 billion.

Additionally, the Securities and Exchange Commission and federal prosecutors are blocking any merger while they investigate Trump Media’s dealings with Digital World after questions were raised about the timeliness of their merger announcement.

Ohlrogge said the SEC will likely look into whether Trump made a deal or approached Digital World before Spac began selling shares without telling potential investors, in violation of financial regulations.

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

Meanwhile, Digital World’s stock price fell sharply from a high near $100 to around $23, although anyone buying from the initial offering would still double their money.

Ohlrogge said it was unclear why shareholders had not approved the merger by the September 8 deadline. He said some may not have been paying attention. Others may withhold approval until Trump resolves issues with the SEC.

“What makes the most sense for Trump’s business would be to settle with the SEC, do whatever it wants, and try to make it happy in order to move it forward. That kind of approach, however, doesn’t seem to be Trump’s preferred method in most legal dealings. He seems to be fighting tooth and nail,” he said.

Some shareholders were nervous about the wisdom of financial dealings with Trump once they found out where their money was going.

Digital World has now called a special meeting of shareholders next month to extend the deadline for merger approval by a year. This remain unclear how will that be after Spac acknowledged earlier this year that Truth Social “may never generate operating revenue or achieve profitable operations.”

Jennifer Stromer-Galley, a professor at Syracuse University’s School of Information Studies and author of Presidential Campaigning in the Internet Age, said Truth Social is an effective tool for Trump to stay in touch with his base, which is to some extent amplified by journalists writing about his statements. But she wondered if it could ever go beyond being a political campaign tool to operating as a business.

“One of Trump’s great assets has always been his name. Through his brand, he gets an instant base of people from which Truth Social can start to grow. But then he has to expand beyond that. of that because it’s probably not enough to keep this business going I don’t see how Truth Social expands beyond that very, relatively narrow, hardcore base of bread and bread riding Trump butter,” Stromer-Galley said.

“If I were an investor in communications, media and technology companies, I would be skeptical of Truth Social’s real business. When the head of the company can’t put together a cohesive business case or legal case for what they’re doing, is that really somewhere you want to put your money? »

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