Truth Social Is Donald Trump’s Greatest Scam Yet
Reading Time: 5 minutesDonald Trump Looks Ready to Absolutely Decimate Truth Social Investors, In a conversation with Elon Musk, the former president likely did little to help his campaign—or his investors., Donald Trump’s Truth Social: The former president’s return to Twitter r
Donald Trump spent Monday providing free publicity for the main competitor of his publicly traded social media company, and you’ll never guess what happened next.
Trump stopped posting on Twitter when the company’s old management banned him following Jan. 6. Elon Musk has urged Trump to come back, but the former president has stayed away, only dropping by to post his mug shot and a fundraising link in August 2023. But Trump came back to X on Monday, trying to post his way out of a tough campaign month that started when Kamala Harris replaced Joe Biden. Trump sent one message at lunchtime and followed it up with a few videos. At the end of the day, Trump joined a (logistically troublesome) X Spaces call with Musk, who swallowed the red pill a few years ago, seemingly rejecting his former progressive-leaning ways, and has become both a fawning Trump admirer and possible megadonor in recent months.
After Trump’s Twitter ban, he started Truth Social and housed it under Trump Media & Technology (stock ticker: DJT). The stock lost 5 percent of its value on Monday and was in a continued slide on Tuesday morning. Apparently it is not good for confidence in a business when the majority owner of that business spends his time propping up a direct competitor that provided the entire basis for the owner’s copycat business.
Ostensibly, the existence of Truth Social has been the only reason Trump has not tweeted over the past few years. However, his campaign is going poorly enough that Trump has abandoned that strategy and decided to compromise his own shareholders. It’s very possible that Trump’s dalliance with Musk on Monday is just the opening salvo in a political comeback effort where his own investors are somewhere between collateral damage and Trump’s personal piggy bank.
Why, exactly, did Trump Media’s stock go down on Monday? A conventional analysis of a regular company would hold that it wasn’t about Trump’s return to X, but actually about the company’s poor quarterly earnings report, which came out the same day. Trump Media lost $16 million in the quarter on $837,000 in revenue.
But that doesn’t matter. Trump Media is not an actual business with a real path to making money. It is instead a place for the former president to post freely before a friendly audience while converting the enthusiasm of some of his biggest fans into enterprise value for himself.
The stock price does not go down because the company loses $16 million in a quarter on less than $1 million in revenue. That is actually pretty good by this company’s standards. In the first quarter, the company brought in about the same amount and lost more than $300 million, because it is, again, not an actual business geared toward making money. On the news of that exponentially larger loss, the stock price ticked down just a little bit the next day but had recovered the losses and then some by the next week.
There is no indication that Trump Media’s earnings have a lot to do with its stock price. Even now, with the stock trading at about $25, half of where it was earlier this year, Trump Media is somehow a nearly $5 billion company. Its main business is cash incineration, with a light side-dish of advertising. The company is also getting into streaming, that famous moneymaking business where even well-established media brands with broad popular appeal who aren’t associated with the most polarizing figure in the modern history of the country have never failed to establish a foothold.
Rather, Trump Media is a $5 billion company because some of Trump’s fans think it is cool to own a company that trades as $DJT and supports Trump. It’s the most meme-stocky stock on the market, a company with a way worse business story to tell than GameStop or AMC. The bull case for Trump Media is that it could one day be like X, a company that has destroyed billions of dollars in value and is currently suing a coalition of blue-chip advertisers for not wanting to do business with it.
What Trump Media does have is a concrete association with Trump, who the company says owns 57.6 percent of the stock. To the extent there is any business case for Trump Media, it is that Truth Social is the one where Donald Trump personally hangs out, and thus it is the one where his monetizable fanbase hangs out. This isn’t true—the big names in conservative media and most of the rank and file are still on X, TikTok, and the like—but it’s a story.
Trump returning to X blows up that idea. The longer he sticks around there, the more untenable it is for his otherwise junk company—one in which his own stake is still worth well over $2 billion—to retain any value at all. It is staggering to imagine that anyone who has a large, non-short-selling stake in Trump Media would ever have any desire to hurt Donald Trump, but maybe an enterprising class-action attorney would like to take a shot. Nowhere in the company’s ‘risk factors’ filed with the Securities and Exchange Commission does Trump Media mention the company’s majority owner going out of his way to make a different social media site the most important place in conservative media. Yet that’s what Trump did when he agreed to a live chat with Musk on X, rather than Truth Social.
Trump’s efforts against the interests of the people inflating his own net worth could take an even more serious step in the next few weeks. Trump’s company began trading on stock markets in March, after Trump’s business completed a merger with a shell company designed to be listed on stock exchanges. Right now, Trump’s $2 billion-and-change stake is just that—an illiquid stake in a company that makes negative money and relies wholly on public perception to retain its paper value.
But in September, a six-month lockup period on Trump’s shares—nearly 60 percent of the company—ends. Trump could begin selling shares this fall, using his ownership of this spectacular money-losing venture to redistribute money from his investors’ pockets to his own.
Trump owns so many shares that selling them would invariably push the price way down, but he could still make many millions or billions of dollars if he offloaded his shares at the right time. Meanwhile, Trump Media slipped an announcement into the Fourth of July weekend that it was laying the groundwork to sell up to $2.5 billion in new stock. If the former president and his company were so inclined, they could run a nice little one-two punch later this fall: Sell a bunch of stock to enthusiastic retail investors who can’t wait to own a piece of Trump’s empire, and use their investments to help the price before Trump begins selling some portion of his own shares to pay legal bills (or buy new golf courses).
Trump may not actually do that. He may have a sincere belief in Truth Social’s future success, a feeling that would be deluded but not exactly out of step with other things Trump believes. Most insiders don’t wind down their stakes the moment a lockup period ends. Then again, most insiders with publicly traded companies are presiding over more serious businesses.
In theory, the former president offloading his shares in his own company would be a vote of no-confidence that prompts others to sell their shares too. In practice, maybe not. People do not invest in Trump Media because it has a sincere business model. They invest in it because they like Trump, or they think he’s funny, or they think they can somehow help him by owning a little slice of his company.
Maybe Trump can cash out and somehow convince legions of 36-year-old men on the Robinhood investment app that continuing to buy and hold Trump Media stock is the only way to save the country from Kamala Harris’ implementation of full communism. Anything—except Trump Media working out well in the long term for anybody other than Donald Trump and a few pals—appears possible.
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