Is Donald Trump's Truth Social's Public Debut Worth The Hype? Experts Urge Caution
Investors eager to support former President Donald Trump’s social media venture, Truth Social, may face disappointment, according to Helaine Olen, author and columnist.
What Happened: Truth Social went public today, following its approved merger with the little-known publicly traded Digital World Acquisition Corp. (DWAC). The merged entity will trade under the name and stock symbol — DJT — of Trump’s media company, Trump Media & Technology Group Corp. (NASDAQ:DJT).
Despite the prospect of the new company being valued at approximately $5 billion, MSNBC’s Olen advises caution. She highlights Trump’s history of financial failures and the modest user base of Truth Social compared to its rivals.
Olen points out that Truth Social’s revenue is meager, and its user base is a mere fraction of Twitter’s estimated 500 million. The public offering via a special purpose acquisition company (SPAC) also raises eyebrows due to the lack of financial transparency required compared to traditional IPOs.
Despite these warnings, Trump’s ardent supporters, who have previously turned Digital World Acquisition into a meme stock, are expected to ignore these warnings. The stock has already seen an increase of over 180% this year, although it fell nearly 6% after the merger announcement.
Going public via a special purpose acquisition company (SPAC) is not a guaranteed financial success. Many SPACs have failed, resulting in significant potential losses for investors. Despite these risks, Trump is set to gain $3 billion based on Digital World Acquisition’s current stock price.
However, there is a lockup period of six months when insiders will not be permitted to sell or borrow against shares after going public. This means that Trump’s potential gain could be much lower after the lockup period.
“His fans won't see the truth: Trump is not only a serial fraud, he is one who takes advantage of those who believe in him the most. Stock trading on the ironically named Truth Social is highly unlikely to change that sad fact,” she wrote.
Why It Matters: The merger between DWAC and Trump Media & Technology Group was first announced in October 2021 and has faced several setbacks and delays.
Truth Social, founded by Trump after his Twitter ban, has significantly fewer users than its rivals, with an estimated 5 million active users compared to Twitter’s 500 million. Its revenues are also considerably lower.
Wall Street financier and prominent Republican donor, Jeff Yass, has reportedly been identified as a significant shareholder in DWAC.
Image via Shutterstock
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