No, Truth Social Isn’t a Cash Cow for Donald Trump. Here’s Why.

To a casual observer, it may seem that Donald Trump’s bet to build up his own social network—after getting booted from his own “beautiful Twitter account” post-insurrection—may have literally paid off. On Tuesday, shares in Trump Media & Technology Group, the parent entity for the ex-president’s homegrown Truth Social platform, began trading on the NASDAQ after the company’s successful merger with a highly capitalized special purpose acquisition company, or SPAC, known as Digital World Acquisition Corp. Debuting on the charts with a “DJT” ticker, Trump Media saw a 55 percent surge in valuation right after markets opened.

Huge influx of cash, right? With Trump holding about 79 million shares, equating to 58 percent of available stock, the SPAC debut balloons his net worth by nearly $5 billion; there were about 136 million shares outstanding post-merger. What a turnaround, right after the lamestream media kept claiming that Trump was in the tank! Another genius business move from the Donald, right in time for him to cover his somewhat discounted legal bills!

Except … not really, because a lot of what’s powered this first-day boom is not super tenable in the longer term—much like Truth Social’s business itself.

To put it simply: The success of Trump Media’s public debut has less to do with its viability as an enterprise and more to do with the fandom surrounding that famous name. Before going public, this company was far from profitable: Truth Social itself only garnered $3.38 million in total revenue over the first three quarters of 2023—and lost $49 million over that same period, with over half of that loss occurring in the third quarter. Per Axios: “The company’s cash-on-hand dwindled to just $1.8 million at the end of September … while its total liabilities climbed nearly 72% to $60.5 million.” (Digital World’s pre-merger federal filings noted that “management has substantial doubt that [Trump Media] will have sufficient funds to meet its liabilities as they fall due.”) Considering that Truth Social remains a free platform that’s financially dependent on ads convincing users to buy, uh, collectible gold coins of Trump’s mug shot and pillows manufactured owned by a broke election denier, there’s no real financial lifeline on the horizon. And there are no incentives for more lucrative advertisers, seeing as the 2-year-old platform only commands about 5 million active users, has lost 39 percent of its active user base over the past year, and has persistently seen reduced traffic and download numbers from its peak, per CNN Business.

As I noted last year, those pitiful earnings represent a steep drop from the hundreds of millions of dollars that Digital World Acquisition had raised from investors, some of whom yanked out their commitments before the merger. Bloomberg reported Monday that some initial DWAC investors were so bearish that they redeemed their shares before the merger was approved, taking a 75 percent loss on those investments. In other words: The company is a financial mess.

You may be wondering just whence that staggering valuation arises, then. There are a couple factors at play here—namely, rich friends and then retail-level suckers.

Let’s talk about the rich friends first. As a shell company established with the express purpose of gathering investments and absorbing them into the minimally operational enterprise Trump Media, Digital World curried investments from all manner of private institutions, most significantly Susquehanna International Group. That trading firm, as various outlets have noted, is directed by Jeff Yass, the Republican megadonor who has been floated as a potential treasury secretary should Trump be reelected. His firm holds a 2 percent stake in Digital World and, considering its other assets, can afford some hits as long as Yass gets to own the libs. On Trump Media’s end, its current board of directors is hardly lacking in wealth, or loyalty: The CEO is former Rep. Devin Nunes, and his teammates include Donald Trump Jr. plus former Trump administration members Kash Patel, Robert Lighthizer, and Linda McMahon (as in, yes, the wife of embattled wrestling magnate Vince McMahon).

All these lackeys running the show means there is a lot of (perhaps feigned) confidence from the folks in charge. And remember, the most eager shareholders aren’t necessarily in this for high returns, but in order to support their king. That’s in their own words, as demonstrated by comments in the DWAC-dedicated “groups” on Truth Social: “I’m holding and plan on being part of the greatest social network there is and will support former and future President Trump.” (Such is the anthem of the aforementioned retail-level suckers.) This all means that $DJT is basically—as the Wall Street Journal pointed out in DWAC’s case—the political equivalent of a meme stock. “Institutions aren’t trading this,” as a SPAC expert told the paper. Rather, it’s a lot of Trump supporters dying to support their president and either hold on to or buy enough of the shares available so as to push the price up—and maybe, they hope, bring more people to their website of choice. “Trump has 6.77 million followers as of now,” one trader noted on Monday. “I wonder if when DJT is officially public … will his follower count be updated to a more realistic number.” (He still has 87.4 million followers on Twitter, by comparison.)

But the problem isn’t just that this whole charade is run by deep-pocketed supplicants on behalf of enamored followers. It’s also the fact that, structurally, none of this is going to help a rather cash-broke Trump now or anytime soon. Per the terms of the merger, Trump is forbidden from selling any shares for at least six months; he could, however, request a waiver on this from the board, which would no doubt bless any desire of his. But if he were to gain that waiver and try to sell any of his 79 million shares now? Well, those retail investors are planning to hold on to their shares until the general election. They’re literally banking on a Trump reelection to push the stock through the roof so they can get rich—and outbid the hungry short-sellers who are willing to wager quite a bit on their Trump Media bearishness. And that’ll only work if Trump himself has confidence in his platform and doesn’t dump a bunch of stock, or even give a hint that he’s thinking of doing such a thing (like by, say, requesting a waiver from the board), which would inevitably scare the smaller-scale investors, piss off Jeff Yass, and send Trump Media’s valuation plummeting.

The question is: Does Trump have that kind of confidence in his platform? The terminally online former president is surely aware of how low his Truth Social follower count is. Plus, he still needs money, fast, and not just because he might not have enough liquid cash to even cover the $175 million bond he needs to pay off by April 4. Right now, both Trump Media and Digital World are facing three lawsuits, including one from two Truth Social co-founders and former Apprentice contestants who allege that Trump purposefully stiffed them on a company stake. That litigation isn’t going to die down in the midst of a meme-stock craze.

By the end of Tuesday, the stock had dropped from its 55 percent surge down to 16 percent up from pre-market levels. As of this writing, it hasn’t returned anywhere near close to that peak, thanks to other opportunistic buyers who bought in only to cash out quickly. Surely people will keep on trading $DJT. It just isn’t actually going to help the man behind the initials anytime soon. And, should he lose in November, it might not ever help him.