The Truth About Investing in Donald Trump’s Truth Social Platform
Donald J. Trump, former President of the United States, is no stranger to business failures and bankruptcies. However, despite his track record, he has recently launched Truth Social, a social media site aiming to rival Twitter. Investors considering putting their money into the stock tied to this platform should proceed with caution.
Truth Social is a highly speculative and high-risk venture with limited concrete information available. It has already faced subpoenas from regulators and a grand jury, despite being in its early stages. Additionally, Trump himself is not obligated to use the social media site extensively or at all to communicate with the public, especially if he were to return to the White House as a result of future elections.
The stock-market prospectus for Truth Social, recently filed with the U.S. Securities and Exchange Commission, highlights the potential risks involved in investing in this venture. It points out that several companies associated with Trump have filed for bankruptcy in the past, including the Trump Taj Mahal, Trump Plaza, Trump Castle, and Trump Hotels & Casino Resorts. These failures raise concerns about the future success and stability of Truth Social.
Trump’s failed casino operation, Trump Hotels & Casino Resorts, not only faced bankruptcy but also had legal troubles with the Securities and Exchange Commission. This history does not inspire confidence in Trump’s ability to run a successful business venture.
Furthermore, the prospectus reveals that Trump has a long list of failed businesses, including Trump Shuttle, Trump University, Trump Vodka, Trump Mortgage, GoTrump.com, and Trump Steaks. These ventures either defaulted on loans or ceased operations due to various reasons such as lawsuits, investigations, or lack of sales. The repeated failures cast doubt on the viability of Truth Social and its potential for long-term success.
In terms of financials, Truth Social reported an operating loss of $10.6 million on just $3.4 million in sales in the nine months leading up to September 2023. Additionally, it accrued $37.7 million in interest expenses during that period. The lackluster financial performance raises concerns about the company’s ability to generate revenue and sustain profitability.
Investors seeking more financial details about Truth Social are not alone. Even Digital World Acquisition Corp., the shell company set to merge with Trump Media & Technology Group, expressed a desire for more information. Unfortunately, Trump’s business did not provide the necessary financial projections during the due diligence process, leaving potential investors in the dark.
Moreover, the leadership at Truth Social seems to lack a data-driven approach. The prospectus reveals that the company has not relied on specific key performance metrics or maintained internal controls and procedures for collecting such information. This lack of focus on key metrics raises questions about the company’s ability to make informed business decisions and track its progress effectively.
Another significant concern is Trump’s limited agreement with Truth Social. While investors are banking on Trump’s involvement to drive the platform’s success, there is no guarantee that he will use it extensively, or at all. According to the prospectus, Trump is only required to post nonpolitical messages from his personal accounts on Truth Social first. The exclusivity of each post lasts for a mere six hours, and Trump can terminate the agreement with 30 days’ notice, potentially shortly after Inauguration Day. This raises doubts about the platform’s ability to attract users and maintain a consistent stream of engaging content.
In terms of ownership, Trump will hold at least 58% of the stock in the new company, giving him complete control. Minority investors may find themselves with little influence over decision-making or the direction of the company.
Considering all these factors, investors should approach investing in the stock tied to Donald Trump’s Truth Social platform with caution. The history of Trump’s business failures, combined with the limited financial information available and uncertainties surrounding Trump’s involvement, make this a risky investment. It’s crucial to thoroughly evaluate and consider all the potential risks before putting your money into this venture.
In conclusion, investing in the stock tied to Truth Social requires careful consideration. The past failures and legal troubles of Trump’s previous business ventures, combined with the lack of financial transparency and uncertainties surrounding Trump’s commitment to the platform, raise significant concerns. It is essential to weigh the potential risks and rewards before making any investment decisions in this high-risk venture.
