Trump, a former president and white supremacist, announced Wednesday night that he will launch Truth Social next year. Beta testing will open up in November to select users. The site was hacked by pranksters within hours of its announcement. This is not the best part of the story.
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The most fascinating thing about Trump's social media platform plan is not how it will be used to make money. Donald Trump is known for his shady business practices. It will be fascinating to see MAGA investors get conned by Trump's new venture, which seeks to go public through a special-purpose acquisition company or SPAC.
The Trump Media and Technology Group (TMTG) is the business behind Truth Social. It has a Mar-a-Lago business address, but it is not yet registered with the state. Gizmodo cannot verify this. According to Liz Harrington, spokesperson for TMTG, the company is worth $1.7 billion. This figure was certainly not gleaned from former presidents.
According to the Wall Street Journal, TMTG will merge with a shell company called Digital World Acquisition Corp. in order to get listed on a stock exchange. Trump Media and Technology Group can go public by piggybacking with a different company. Trumps media and technology companies get to bypass a lot of regulatory hurdles that exist in order to keep companies transparent, so investors are less likely be screwed.
Here's how The Wall Street Journal explains:
A SPAC, also known as a blank-check company, is a shell business that lists on a stock market with the sole purpose of merging with another private firm to make it public. The SPAC's position in the stock exchange is then taken by the private company. SPAC mergers are very popular among startups. They can make projections about their business. These projections are not allowed in normal IPOs.
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The Wall Street Journal points out that investors in any SPAC can withdraw their money before the deal is completed. The newspaper suggests that Trump's SPAC deal could be an example of this.
Another example from the Wall Street Journal
Digital World Acquisition SPAC currently has approximately $290 million in its bank account. Trump's firm could use money from the SPAC to finance its growth, but the cash pile could shrink. SPAC investors are entitled to withdraw their money from the deal at any time. These withdrawals have skyrocketed recently, with many SPAC shares falling as a result. This is because some companies that went public in this manner struggled to reach their growth targets.
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We are skeptical that Trump's ardent supporters, which we have too many of, will withdraw their money even though things seem to be going down. Trump's anti-democratic brand has one strength: people who believe in it will invest for more than money. Trump supporters have donated millions to the ex-president in campaign contributions. If Trump is advertising a private cause, they will likely give even more.
The private cause in this instance is a battle against Big Tech companies such as Google, Facebook, Twitter. Trump's pro-fascist supporters will not mind if he makes a few bucks along the way.
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Trump needs to get moving if he wants his company to be a success. The SPAC bubble, as Harvard Business Review recently stated, could burst at any moment. A study last year found that the share prices of most SPACs plummeted after mergers.
We would normally be cautious about SPAC deals with unproven businesses, but this is an exception. Anybody who invests in Trump and his shell company knows exactly what they are getting into. We encourage you to support Trump Media and Technology Group if you are a Trump supporter. You will get all you deserve.
