Why Trump Being President Again Is Not Actually Good for Truth Social
Reading Time: 5 minutesTrump’s Biggest Fans Are Going to See Their Investments Implode Big Time, His election win sent his company’s stock soaring again—but gravity is likely coming for its investors., Truth Social: Why Trump being president again is horrible for his social medi
At least the stock market is happy about the election. The S&P 500 rose by 3 percent on Wednesday; the Dow Jones Industrial Average, by 4 percent. Investors are pleased enough to have an antiregulator Republican returning to the White House, and they are happy that Democrats do not appear poised to attempt a Jan. 6 of their own. Your 401(k) has swelled this week, undeterred by any fears that Donald Trump’s promised tariffs on foreign goods could make things more expensive.
Other market movements on Wednesday were roughly what one would expect after a Trump return to power. Bitcoin went up, because Trump has signaled his friendliness to crypto. Pfizer and Eli Lilly went down, because Republicans don’t like vaccines and Robert F. Kennedy Jr. may now get the chance to gut both public health advances and pharmaceutical profits.
One big mover on Wednesday, though, was nonsense: Trump’s social media company, Trump Media and Technology Group, rose by 6 percent, beating an already hot market. This jump came after some wild swings on Election Day, when the stock bounced up and down and exchanges halted trading to calm everyone down. Trump’s win sent the stock soaring again, and ostensibly, that makes some sense. A win for Trump is good for Trump, and therefore $DJT stock should go up, because Trump’s stock in our society is up.
The stock has become a vehicle for Trump’s fans to invest in him figuratively and literally. As Trump Media’s majority shareholder, Trump is the person whose net worth goes up the most when anyone else buys the stock. Tuesday made clear that the United States does not have a diminishing supply of people who will stand up for Donald Trump.
But there is a paradox behind Trump’s win. Although his victory has already been good for Trump Media stock, his return to power is unambiguously horrible for Truth Social’s actual business. The business fundamentals of Truth Social have so far been untethered from its company’s stock performance, and I am not foolish enough to take a guess at when that dissonance will end. But Truth Social’s path to being a serious player as a social media platform is even longer than it was before Trump beat Kamala Harris. The questions are if gravity will ever take hold and if Trump will cash out of the stock before it does.
The underlying tension for Truth Social here should be clear. When the company filed with the Securities and Exchange Commission for its stock to trade publicly, it realized that its best business case was that Truth Social would be the place for Trump’s fans to hear from him directly and without a filter. So, Trump agreed—and the company represented to the SEC—that when he posted on Truth, he wouldn’t post the same thing on any other social platform for at least six hours.
This clause has been crucial to Truth’s business, to the extent it has a business. Short-form text platforms like Twitter and Truth are just not the engagement magnets that TikTok and Instagram and YouTube are, and Truth was implicitly catering to Trump fans rather than the whole market. It never had a hope of attracting many blue-chip advertisers. Sure enough, the company is a cash incinerator. Earlier this year, it lost $16 million in a quarter while bringing in $837,000 in revenue.
The one thing Truth has had going for it is that it is the place where Trump posts. But the clause restricting his postings elsewhere does not apply to Trump’s explicitly political messaging. Now that he is president, all of his messaging is political.
Trump returned to X in the latter weeks of the campaign and will surely remain there when he is back in the Oval Office. The platform provides a bigger megaphone than Truth Social, and Elon Musk, its owner, is now Trump’s most important backer. There’s already strong evidence this won’t bode well for his social media company. Trump Media’s stock went down after Trump did a live audio call on X with Musk over the summer, though it has since rebounded.
At the time of Truth Social’s launch, Musk had not yet bought Twitter and Trump remained under a ban imposed by the site’s old management. It was obvious Truth was a bad business from the start, but it was at least reasonable to think that it would be the social platform where Trump would spend his internet time. That’s worth something, given the tens of millions of people who adore him.
That was already mostly out the window, and it has to be all out the window now that Trump not only is an enthusiastic user of Truth’s top competitor but is in an oligarchic buddy-cop movie with its owner. Decisions by Twitter’s former management were the genesis of Truth’s founding, as an alternative social media platform that would be friendly to ‘free speech,’ which really meant promoting right-wing voices and taking a lighter moderation touch when accounts share falsehoods or hate speech. Decisions by that site’s current owner obviate nearly the entire value proposition of Truth, and whatever remains fades away a little bit more every time Trump does anything on X. As a proper business, Truth Social is dead in the crib.
As a meme stock, though, Truth Social is not dead at all. At the market close on Wednesday, its share price was nearly $36, an amount that was about $36 higher than it would have been trading if it weren’t an objective of retail-trading fascination because of its association with Trump. Perhaps the company can use the rally to issue some more stock and sell it at inflated prices, putting money into its coffers to grow its business. Meme-stock companies do that sometimes. The dream, lived out by video game retailer GameStop, is to use meme-stock status to make some improvements to the underlying operations.
Or Trump, who owns 58 percent of Trump Media’s stock, could just cash out. Trump’s equity in the company is $4 billion on paper, and as long as there are willing buyers, Trump has the option of selling huge chunks of his shares without pushing down the price too much. Some Trump supporters donated to his political campaigns, but Trump Media has provided a much more innovative way to support the 45th and 47th president: His fans buy the stock and push the price up, increasing the value of Trump’s personal holding by billions of dollars. Trump has the option to use them as liquidity, selling his own stock whenever he wants. That would lower the value of the stock that his fans are still holding, but it would allow Trump to take billions out of a company that only blowtorches cash.
There is no great reason to think that Trump will not choose this course. He will not live forever, as much as it feels today like he will. Trump Media and Technology is a purposeless and ultimately valueless company, but it is currently an immensely valuable stock. These two things are not usually true of the same company at the same time, but Trump is immune not only from legal consequences for anything but also from the old-school laws of markets. One of the great works in the life of America’s most successful con man is only a few sell orders from being realized. Why would he not take the opportunity, particularly when the investors who have gifted him this asset would be so enthusiastic to hold the bag?
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