It takes a brave investor to do business with Donald Trump.
The former president’s hotel and casino has declared bankruptcy six times. Trump’s short-lived airline crashed. He paid millions to settle multiple lawsuits that the conservative National Review called “massive fraud” for running unlicensed “universities.” And a criminal trial for tax evasion by the Trump Organization is looming.
Nonetheless, the business built on Trump’s famous ability to offend millions online is funding the company behind Twitter rival Truth Social. It must have seemed like a good bet to those who invested.
More than $1 billion invested amid federal investigation into whether shareholders hesitated and broke the law in dealing with a company set up to fund Trump Media and Technology Group is stuck, it is also facing problems.
As is often the case with former presidents, we don’t immediately know what’s going on.
Trump launched Truth Social in February after taking office. thrown away Twitter for inciting violence after he lost the presidential election. He previously ran a blog, From the Desk of Donald Trump, which was shut down less than a month later because almost no one read it.
Truth Social has worked well as a vehicle for Trump to shake his foundations and rage at his enemies, and for white supremacists and far-right people to say what they can’t say on Twitter. However, it did not generate the kind of reach that other social media platforms enjoy.
Trump has about 4 million followers on Truth Social and 80 million followers on Twitter. One reason, he said, is that Google’s app store has been unable to remove posts that incite physical threats or violence, limiting its scope.
According to online analytics firm Similarweb, Truth Social received just 11.5 million visits in July, compared to 7 billion on Twitter. Last month, Trump Media reported that he lost $6.5 million in the first half of this year. It is also reported that the web hosting company is in debt.
This begs the question as to whether investing in Trump media is a sound business decision or if money could be thrown into the sinkhole of the former president’s constant political campaigns.
Michael Orroge, a New York University law professor who specializes in the kind of fundraising Trump is currently seeking, said there was no evidence Trump Media had a strategy to become a money-making company.
“There are a lot of questions about whether this is a viable business. It is,” he said.
The Trump Media expected a large infusion of money from a Shell Corporation set up solely to merge and raise money with another business, known as a Special Purpose Acquisition Company (Spac). .
Digital World Acquisition Corp, founded a year ago as Spac, has not committed to investing in Trump’s media business. Shareholders bet that the value of their investment would increase when Digital World found a company to merge with. That’s exactly what happened when a deal with Trump Media was announced just seven weeks later, and Digital World’s stock price rose tenfold.
Earlier this month, however, shareholders missed a deadline to approve the merger, robbing Trump Media and Truth Social of about $1.3 billion.
Additionally, the Securities and Exchange Commission and federal prosecutors are blocking a merger after the speed of the partnership announcement raised questions while investigating Trump Media’s deal with Digital World.
Ohlrogge said the SEC would look into whether Trump made or came close to an agreement with Digital World in violation of financial regulations before Spac began selling shares without notifying potential investors. said it is likely that
“If they had already had pre-negotiations with Trump’s Spac and didn’t communicate that to the initial investor, it could be a relatively clear violation of securities law. That was the case. There are relatively good reasons to suspect that,” he said.
Meanwhile, Digital World’s share price plummeted from a high near $100 to around $23, but those who bought from the initial offering can still double their funds.
Ohlrogge said it was not clear why shareholders had not approved the merger by the Sept. 8 deadline. He said some people might not be paying attention. Others may be holding off on approval until Trump resolves his issues with the SEC.
“What makes the most sense for Trump’s company is to try to settle with the SEC and do whatever the SEC wants to keep the SEC happy in order to move forward with the merger. doesn’t seem to be Trump’s preferred method in most legal deals.He seems to be fighting tooth and nail,” he said.
Some shareholders were nervous about the cleverness of their financial deals with Trump after knowing where their money was going.
Digital World has called a special shareholders meeting next month to extend the deadline for approval of the merger by one year. It remains unclear what will happen after Spac acknowledged earlier this year that Truth Social “may never generate operating revenue or achieve a profitable business.”
Jennifer Stromer-Garry, professor of informatics at Syracuse University and author of Presidential Campaigns in the Age of the Internet, said Truth Social was an effective tool for Trump to keep in touch with his base, and that it He said it was amplified to some extent. by a journalist writing about his statement. But she wondered if it could go beyond a political campaign tool and function as a business.
“One of Trump’s tremendous assets will always be his name. Thanks to his brand, he will have an instant base of people upon which Truth Social can begin to expand. We need to expand beyond that, probably because there isn’t enough to keep this business going, and if Truth Social is going to take the very, relatively narrow, hardcore base that is Trump’s bread and butter constituency, I don’t know how it will expand beyond.
“If I were an investor in a telecommunications, media or technology company, I would be skeptical of what kind of business Truth Social actually does. If you can’t, what are they doing and is this really where you want to put your money?”