A Trump-themed Twitter
The former president has launched his own social-media venture after being banned from the likes of Facebook. Matthew Partridge reports
Donald Trump is making his media comeback. Having been banned from Facebook, Twitter and YouTube following January’s riot at the Capitol, he now claims that his new social-media company has raised $1bn from investors. As a result, plans by Trump’s Media & Technology Group to go public by merging with a special purpose acquisition vehicle (Spac) called Digital World Acquisition Corp (DWAC) are likely to go ahead. Shares in DWAC, which raised $293m at an initial public offering in September, currently trade at around $45, more than four times their initial price.
Trump’s new digital offerings will consist of two linked services: social-media platform Truth Social, a provider of microblogging services, and TMTG+, which produces streaming content, says Lex in the Financial Times. Together they will form a “Trump-themed Twitter and Netflix cross, offering mass-market viewership loyal to Maga [make America great again] values”.
Still, investors should be concerned about the “sketchy aggressive topline forecasts”; furthermore, far from being profitable, most streaming services have “incinerated cash” in the first years of operation.
Several red flags
The lack of a “detailed business plan or financial projections” aren’t the only “red flags” here, says Timothy O’Brien on Bloomberg. Trump’s new company “hasn’t completed its merger with DWAC or made associated securities filings”. And his “ill-fated casino gambit” made “multiple tours through bankruptcy, burning investors, banks and employees along the way and leaving behind a haunting collection of craters in Atlantic City”. Note too that Spacs, which exist to buy up other companies, have a “shoddy” track record. They have been “underperforming more standard initial public offerings”.
Even before the deal has been completed regulators are starting to ask awkward questions, say Liz Hoffman and Amrith Ramkumar in
The Wall Street Journal. The Securities and Exchange Commission (SEC) is investigating communications between Digital World and Trump amid reports that Trump met with Digital World CEO Patrick Orlando early this year. If Trump did engage in “substantive deal talks” before Digital World went public it “could violate SEC rules”. Spacs “aren’t supposed to have a target company identified at the time they initially raise money”.
Still, neither the regulatory questions nor the lack of “tangible business proposals” are likely to deter some investors from putting their money into Trump’s latest venture or similar projects, such as Rumble, another partisan social network, says Abram Brown in Forbes. This is because, like GameStop earlier this year, such “meme stocks” seem “more about investing in a social statement than a wager on future cash flows or profits”. In this case the “middle finger” is directed at Big Tech, which Trump supporters claim “unfairly limit speech” by removing certain content.