Trump Is Closer Than Ever to a Giant Truth Social Payday

As long as two major civil-court rulings hold up to appeal, Donald Trump is about to lose a lot of money. In January, the former president was ordered to pay $83.3 million to E. Jean Carroll in a defamation suit. On February 16, he was ordered by Judge Arthur Engoron to pay $354 million for years of inflating his net worth and other acts of business fraud at the Trump Organization. The former president is still extremely asset rich, but the next year would be a great time for him to come into some easy money.

That windfall may come from an unlikely place: Truth Social. In mid-February, the Securities and Exchange Commission signed off on the media company’s merger with a SPAC, or special purpose acquisition company — a somewhat surprising move given the troubled history of the deal until now.

The Washington Post reports that Trump would hold 78 million shares of the new company, between 58 and 69 percent of its total shares, with a net worth of almost $4 billion. But that impressive number comes with a big caveat: Trump would be unable to sell shares within six months of the deal’s close. By the time he can, their value may have sunk — particularly given the importance of Trump’s presidential bid to Truth Social’s net worth. (On March 22, Digital World will hold a shareholder vote on the merger to determine how to move forward.)

The SPAC route had failed so far in large part because of an inquiry by the SEC into the accuracy of its disclosures to investors. In case you’ve forgotten, since it peaked in popularity around 2021, the process involves a real business combining with a shell company to go public without the scrutiny of an IPO. In this case, the shell company is called Digital World Acquisition Corp. and the real one is Truth Social’s parent company, Trump Media & Technology Group. (Neither responded to requests for comment.) SPACs do not have a high success rate and tend to lose a lot of money for investors. The process has largely gone out of fashion, and new regulations to protect investors make SPACs even less attractive to companies trying to get rich quick.

The Truth Social story has followed a similar arc to many of Trump’s failed businesses over the years: media attention and value inflation in the early days, followed by legal woes, allegations of shady financing, and financial struggles. Truth Social may yet defy that pattern. But like Trump’s hopes for staying out of prison, its potential success probably relies on him winning the presidency again.

Trump’s SPAC deal had been stuck in limbo amid this general downward trend. In 2022, under SEC investigation and unable to rally shareholders, Digital World Acquisition Corp. missed its first deadline to go public, forcing it to return $1 billion in early investments. (The SEC eventually settled with the firm for misleading investors, resulting in an $18 million fine if the merger ever happens.) In 2023, in a separate inquiry, the Securities and Exchange Commission and federal prosecutors accused three of Trump’s partners of insider trading on the proposed merger. Truth Social user numbers remain extremely disappointing, and financial statements show that its parent company, Trump Media & Technology Group, is losing tens of millions in operating costs for every million they see in ad revenue. In an SEC filing from November, the company’s accountants wrote that they had “substantial doubts” about staying afloat. And as the merger deadline in September looms, there is no sign that they have gotten any closer to SEC approval of their financial disclosure to investors — a necessary step any SPAC needs to complete.

But hints of a potential Truth Social turnaround began at the Iowa caucuses in January. After Trump’s commanding win in the first primary state, stock in Digital World Acquisition Corp. surged by over 200 percent, suggesting that retail investors either view the social network as some kind of meme stock or, perhaps, see some genuine value in the company. “After the announcement of a SPAC merger, essentially all shares typically move into retail investors’ hands,” says Stanford Law professor and SPAC skeptic Michael Klausner. “This was true of Digital World Acquisition Corp. These people may think there is value in the merger, but I wouldn’t take a tip from them. I have no reason to believe they know anything.”

Even if the merger does go through, any kind of comeback is contingent on what happens in November. “If he were to lose the election it would be really bad for the value of Truth Social,” says NYU law professor Michael Ohlrogge, another SPAC skeptic. After all, what value is there to a third-tier social-media company presided over by a two-time presidential loser? But if he were to win, Truth Social’s current value might actually stick. Yes, it would require a divisive politician winning the Electoral College with four criminal cases looming over him — though stranger things have happened, like Trump winning in the first place.

In late February, another complication surfaced when the two men who had the idea for Truth Social in the first place filed a lawsuit against Trump in Delaware Chancery Court, alleging that they were being cut out of their rightful profits from the company. Andy Litinsky and Wes Moss, both of whom had appeared as contestants on The Apprentice way back in 2004, pitched Truth Social to Trump in early 2021. The two of them reportedly ran day-to-day operations at Trump Media and Technology Group, which operates the site. Both of them left amid internecine disputes in 2022. They filed suit through United Atlantic Ventures, an entity they co-founded.

Under the original agreement Litinsky and Moss negotiated, Trump was entitled to 90 percent of the company, and Litinsky and Moss 8.6 percent. (The rest went to a lawyer negotiating the deal.) Their lawsuit alleges that Trump is using what it calls “11th hour, pre-merger corporate maneuvering” to boost the number of authorized shares in the stock from 120 million to 1 billion and that he plans to give many of those additional shares to himself “and/or his associates and children” — ultimately reducing the amount Litinsky and Moss stand to receive to one percent.

Per the Washington Post, Digital World had nodded to the possibility of a lawsuit from UAV in its SEC filing, noting that the case could
“negatively impact investor confidence and market perception.” It also had the potential to delay the key March 22 shareholder vote.

But on March 9, the threat from that lawsuit seemed to dissipate after the two sides reached a preliminary agreement during a hearing in Delaware Chancery Court. Per the New York Times, the deal “would preserve the two founders’ right to a significant equity stake in the parent company of Truth Social until a judge hears further arguments on the merits of their lawsuit.” The presiding judge, Vice Chancellor Sam Glasscock III, appeared to have no appetite for pushing back the March 22 vote date, saying that “No one is suggesting I should do anything to interfere with the closing,” and later remarking that “I’m pretty confident we can work something out.”

As with other Trump properties, it is hard to parse out what Truth Social is really worth. Two years ago, Trump Media & Technology Group was Trump’s most valuable asset on paper, with his shares in the company valued at $730 million; that value was crucial in Trump’s return to the Forbes list of 400 most wealthy people on the planet. But Ohlrogge notes that SPACs often inflate values to make up for the high cost of going public that way. “There’s real concern here that Trump’s media company is inflating its valuation,” he says. Trump’s accountant also feels this way. In his disclosure with the Federal Election Commission last year, Trump valued his Truth Social holdings at somewhere between $5 million and $25 million — far short of the billion-dollar haul he could hypothetically gain from a merger.

The fact that Trump could still wring money out of his lackluster social network helps answer a common question: Why won’t he return to X? He was once quite fond of the app formerly known as Twitter; anyone who has used Truth Social knows that he basically ripped it off. And even though X has an increasing number of flaws, its audience of estimated monthly users is orders of magnitude larger than Truth Social — 500 million compared to around 600,000.

There appear to be some petty reasons for Trump’s refusal to return. With X’s diminished standing, Trump doesn’t really need it anymore — combative missives on Truth Social generally find their way into the news. He is constitutionally not a guy who likes to come crawling back; his party has gotten him quite used to being the one who is crawled to. It also looks like Trump has not resolved his spat from two years ago with X owner Elon Musk, in which he called Twitter “worthless” and made fun of Musk’s reliance on federal backing for Tesla and SpaceX. “I could have said ‘drop to your knees and beg,’ and he would have done it,” Trump wrote on Truth Social, describing a conversation in which he claimed Musk asked for government support for a project.

But there is also a contractual reason for Trump’s fidelity to Truth Social. An SEC filing from January states that Trump is obligated to post first on Truth Social six hours before bringing that content anywhere else — a clause that will continue “in perpetuity” as long as Truth Social is around. Though Trump is not known for adhering to contracts, there is a compelling reason to do so here. Any value left in the app would plummet if he went back to X. The dream of getting even richer just by posting would end.