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The man who propelled himself to the White House on the back of his prolific, if controversial, use of social media, is now set to use it to get himself a massive payday.\u00a0<\/p>\n
Former President Donald Trump\u2019s social media platform Truth Social is preparing to go public<\/a> at a current valuation of $6 billion. Trump himself would own about 60% of Truth Social were it to go public, which would ultimately net him<\/a> a possible $3.5 billion.\u00a0<\/p>\n On Friday, shareholders of Truth Social will vote on whether to merge with a Special Purpose Acquisition Company (SPAC<\/a>) called Digital World Acquisition. The vote is almost certain to pass given the sky-high valuation.\u00a0<\/p>\n The deal has been in the works for a couple years and hit several stumbling blocks along the way\u2014including insider trading allegations<\/a>\u2014but could now finally come to fruition. Buoyed by Trump\u2019s avid supporters<\/a>, the deal looks poised to net the former president a huge windfall just as his liquidity<\/a> and net worth<\/a> come into question now that he must pay hundreds of millions of dollars after he lost two civil court cases in New York. A civil fraud case brought by New York Attorney General Leticia James ordered Trump to pay a $454 million bond<\/a> by Monday. While in January, a judge ruled Trump must pay the writer E. Jean Carroll $83 million<\/a> for defaming her.\u00a0<\/p>\n The massive valuation hovering over Truth Social isn\u2019t necessarily aligned with its financials. It\u2019s more a product of its owner\u2019s ardent online support.\u00a0\u00a0<\/p>\n Truth Social \u201cappears to be a meme<\/a> or cult stock,\u201d says Michael Klausner, a law and business professor at Stanford who has sued SPACs in the past for allegedly misleading investors.\u00a0<\/p>\n Since its inception in October 2021, DWAC\u2019s stock has been on a tear\u2014up 324%. Recently when it became increasingly apparent Truth Social would go public, the stock shot up 60% over an 11-day period in late January. As if to illustrate the connection between Trump\u2019s political prospects and business ties, the stock soared both when he won the Iowa primary<\/a> and when Florida Gov. Ron DeSantis dropped ou<\/a>t of the Republican primary. So far this year shares have risen 133% as the prospect of the SPAC merger, and subsequent IPO, get closer to happening.\u00a0<\/p>\n Much of the rising valuations are boosted by Trump voters<\/a> eager to support<\/a> their candidate not just at the polls but in his latest business venture.\u00a0<\/p>\n Truth Social\u2019s \u201cshares are trading in the stratosphere,\u201d Klausner says. \u201cEventually, its share price will fall to reflect its economics, which at this point, at least, look poor.\u201d<\/p>\n Like most tech startups angling to go public, Truth Social has no profits, losing $31.6 million<\/a> through the third quarter of 2023. However, its revenues, too, are almost nonexistent, slightly more concerning for any company (outside of biotech) that wants to hit the public markets. In the third quarter of 2023 the company generated just $1.1 million in revenue.\u00a0<\/p>\n As a social media app Truth Social has about 8.9 million registered accounts<\/a>, paltry numbers compared to the major platforms that dominate the industry. (Facebook<\/a>, for example, has over 3 billion users). As an upstart, it rates above other niche platforms that, like Truth Social, garner press coverage<\/a> that outkicks their size. Bluesky, launched by Twitter<\/a> founder Jack Dorsey, has about 4 million<\/a> total signups, and Mastodon, another wannabe X replacement, had 2.3 million<\/a> as of October.\u00a0<\/p>\n The eagerness and zeal behind Truth Social recalls some of the most frenzied meme stock moments that took the internet by storm.<\/p>\n None was more popular than the widely covered Gamestop fiasco when retail investors on Reddit held the stock, driving its price higher, while major institutional investors like hedge funds Citadel<\/a> and Melvin Capital<\/a> had shorted it. Ultimately, the stock kept rising because these retail investors\u2014read regular people\u2014had built up such a social media frenzy around Gamestop that they kept buying the stock and refusing to sell, sending its price higher. All while, none of Gamestop\u2019s financial performance warranted the astronomical share price foisted upon it.\u00a0<\/p>\n This time around retail investors seem poised to do the same thing, but perhaps less so because of an internet trend and more so because of a presidential candidate who inspires inordinate amounts of loyalty among his followers.\u00a0<\/p>\n Trump, with a line of business carrying his name ranging from steaks to country clubs to NFTs, has found success parlaying his political reputation into an avid customer base. His NFT collection<\/a>, the Trump Digital Trading Cards, sold out in less than a day. A set of shiny gold sneakers with red soles, dubbed the \u201cThe Never Surrender High-Top Sneaker\u201d and priced at $399, went even faster, selling out in mere hours.\u00a0\u00a0<\/p>\n But investors should already beware of the risks of investing in the stock market, perhaps even more so with a Trump digital venture. Just a month after their debut sales, Trump NFT\u2019s were already down 99%<\/a>.<\/p>\n<\/div>\nSubscribe to the new Fortune CEO Weekly Europe newsletter to get corner office insights on the biggest business stories in Europe. Sign up<\/a> for free.<\/div>\n