News
Will Truth Social solve Donald Trump’s financial problems?
April 3, 2024
By Natalie Sherman and Chris Newlands, Business Reporters, BBC News
The share price of Donald Trump’s media company has fallen since last week’s high, when it was officially listed on the Nasdaq stock exchange.
But it’s still worth more than $7 billion (£5.6 billion) at current prices – an astonishing sum considering the business behind it.
So what is the Truth Social platform, who owns it, how many users does it have, and how much money does it make? And will this be the answer to Trump’s growing legal proposals?
What are Trump Media and Truth Social?
Trump Media & Technology Group was founded in 2021 after Trump lost the presidential election and was temporarily kicked off major social media platforms, including Twitter and Facebook, which accused him of inciting violence.
The idea was presented to him by two men, former contestants on his reality show, The Apprentice, who saw an opportunity to create an alternative to the main social media sites.
In 2022, Trump Media launched its first – and so far only – product for the public: the social media platform Truth Social.
Much of Truth Social’s functionality is identical to X. Users can post ‘truths’ or ‘truths’ as well as send direct messages. The ads, in turn, are called “sponsored truths”.
How many users does it have?
Trump Media says about 9 million Truth Social accounts have been created since its inception.
It doesn’t disclose how many users it has, but research firm SimilarWeb estimates that Truth Social had 5 million monthly visits to the site in February this year.
In comparison, TikTok received more than 2 billion visits, while Facebook had more than 3 billion. X had 104 million visits in February, SimilarWeb reported.
Trump has about 7 million followers on Truth Social, far fewer than the 87 million he has on X. The former president’s X account was reinstated in late 2021, but he has only posted once since then.
How much money does it make?
Trump Media lost nearly $60 million in 2023 while only earning about $4 million in advertising revenue, according to its latest financial update, which also warned of “substantial doubts” about its ability to continue as a business.
The report was yet another reminder of the considerable disconnect between the company’s finances and its share price, which puts its value at around $7 billion.
As a measure, in 2013, when Twitter was listed on the stock exchange, it recorded revenues of 660 million dollars and had a market value of around 24 billion dollars.
In 2021, the year before Elon Musk bought Twitter for $44 billion, that number had grown to more than $5 billion.
What does Trump do for the company?
Trump’s relationship with the company is somewhat similar to the licensing agreements he used in his real estate empire, in which he gave up his name to promote a business managed mainly by third parties.
In this case, Trump also agreed to publish non-political messages first on Truth Social.
The other difference is that this deal did not yield a series of automatic licensing fees – instead, Trump was paid through the allocation of shares in the new start-up.
So who owns it?
Trump Media, led by former Republican congressman Devin Nunes, was originally a private company and Trump owned 90% of it.
It went public in March 2024 through a so-called SPAC – basically, it was acquired by a company whose shares were already publicly traded on the stock exchange, in this case, Digital World Acquisition Corp.
Trump now owns about 57% of the shares in the combined company, which has been renamed Trump Media and trades under the ticker symbol DJT — Trump’s initials.
TMTG’s next largest owner is Kuwait-based investment firm ARC Global Investments, which has a 6.9% stake, according to Trump Media filings with financial regulators.
Former Apprentice contestants also have considerable stakes, although these stakes are currently subject to legal disputes.
The two men – Wes Moss and Andy Litinsky – filed suit against Trump, claiming he was trying to deceive them and obtain their shares. He sued them back, arguing that the social media site’s mismanagement should cost them their shares in the company.
Overall, insiders own around 70% of the shares.
Who else owns the shares?
When Trump Media announced its plans to go public in 2021, the news prompted small investors to snap up shares of Digital World, helping boost its price and drawing comparisons to pandemic-era meme stocks.
At the end of 2023, large financial companies only held about 5% of Digital World’s shares, much less than usual, implying that ordinary investors held most of the rest.
With the merger complete, these individuals now also own a significant portion of Trump Media, although exactly how much is unknown.
Chatter in online forums suggests that at least some of these shareholders see buying shares as a bet on Trump and a way to support him as his legal troubles and accompanying bills pile up.
Trump was ordered to pay more than $350 million in damages in a civil fraud case, with interest charges potentially adding another $100 million.
So will this solve Donald Trump’s financial problems?
After the merger was completed, Trump saw his net worth more than double to more than $5 billion overnight, according to Forbes.
Trump is prohibited from selling his roughly 78 million shares for about six months unless the company decides to grant him an exemption.
But he could earn a windfall if he decides to cash in – even if the price falls sharply, as many analysts predict.
Shares of Digital World, now Trump Media, have fluctuated wildly since 2021 and are expected to continue to fluctuate.
They fetched more than $70 each when Trump Media formally debuted on March 26.
They have since fallen and are trading at around $50 each, making Trump’s stake worth $4.1 billion.
But that’s about where they were the day before launch and three times Digital World’s share value in early 2024.
Even if they dropped to $1 each in six months, Trump could still raise more than $78 million from the sale.