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 it’s just getting off the ground, it’s already the subject of subpoenas from regulators and grand juries. Oh, and even if Trump is re-elected president, he won’t need to use social media sites much (if at all) to communicate with the public. Buying stocks 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 is in talks to merge Trump Media & Technology Group, Truth Social’s parent company, with Digital World Acquisition Corp., a publicly traded shell company, and list the company on the stock market.
DWAC
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look: DWAC rises more than 15% toward Trump Media & Technology Group acquisition – but here’s a potential roadblock
Trump himself has a number of legal issues to deal with, in addition to his presidential campaign. Meanwhile, Digital World itself has had issues with the Security and Exchange Commission, recently agreeing to pay $18 million to resolve fraud charges related to this potential merger.
But don’t worry about this. Trump’s stock price is suddenly soaring as he looks to win the Republican presidential nomination and potentially return to the White House. The company’s stock has tripled since January’s Iowa caucuses to $48, giving it a potential value of $6.5 billion.
However, the prospectus for this deal is staggering at nearly 600 pages. Investors who jumped on the MAGA hype train reveal all the reasons why they should think twice, or even three times, before taking the plunge.
It warned investors that “a number of companies with ties to President Trump have filed for bankruptcy.” “There is no guarantee that TMTG will not fail either… 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, it says, “The Trump Taj Mahal, built and owned by President Trump, filed for Chapter 11 bankruptcy in 1991.” “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, founded by President Trump in 1995, “filed for Chapter 11 bankruptcy in 2004,” the article continues. “Trump Entertainment Resorts, the new name given to Trump Hotels & Casino Resorts after its 2004 bankruptcy, was declared bankrupt in 2009.”
You know what gamblers say, “The house always wins”? Here’s 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 said. It’s clear.
I’ve written about the Trump Hotel & Casino Resort before. Regular investors, drawn to the stock by the allure of Trump’s name, ended up stripping off their shirts, pants and shoes and leaving them in their underwear on the Atlantic City boardwalk. Trump himself made millions of dollars, but shareholders lost almost everything.
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“Trump Shuttle, Inc., founded by President Trump in 1989, defaulted on a loan in 1990 and was defunct by 1992,” the prospectus continues. “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. It’s a stock market prospectus for Trump’s own 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?
There’s also a long section listing all of the former president’s current legal troubles. 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” contract 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, it somehow ended up accruing $37.7 million in interest expense.
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 wants to know more financial details.
Unfortunately, they revealed, Trump’s companies “failed to provide TMTG’s financial projections to the Digital World Commission in connection with the Digital World Commission’s bankruptcy due diligence process.”
I have no choice. You can’t have it all.
Part of the reason may be that the people running Truth Social, led by former U.S. Congressman and CEO Devin Nunes, don’t actually have that much data. “[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. “TMTG, at this point in its development, follows traditional key performance indicators such as registrations, average revenue per user, ad impressions and pricing, and active user accounts, including monthly and daily active users. We believe that it could potentially deviate from its objectives.” Focuses on strategic assessment of business progress and growth. ”
They didn’t want numbers to distract them from their business. Let’s 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)” accounts. 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, immediately after taking office (if any).
And until then, who decides which social media posts are “political” and therefore exempt from exclusive agreements? Guess.
“President Trump…may post social media communications from any personal profile that he determines.”in his sole discretion; having 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?