Truth’s value rests on Trump’s posts and his actions. And it can all fade away in 6 or 12 months

Truth’s value rests on Trump’s posts and his actions.  And it can all fade away in 6 or 12 months


Welcome to Outlook, the Repubblica newsletter that analyzes the economy, finance and international markets.

What I know about financial markets and the economy I learned by working for one of the main stock exchanges on Piazza Affari, the companies that buy and sell securities on the stock exchange for large investors. I took it with me when I became a journalist for La Repubblica where, among other things, I covered investigations and major scandals such as that of Parmalat, helping to unmask its false financial statements. Every Wednesday we will talk about listed and unlisted companies, personalities, institutions, scandals and investigations linked to this world. If you want to write to me, my email is [email protected]. Enjoy the reading

Walter Galbiati, deputy director of Repubblica

When in February 2021 Donald Trump he was banned “forever” from Twitter he had two options in front of him: either to resign himself and look for some other social network willing to accept him or to found his own social network. And option two, given his personality, ended up prevailing.

Truth vs. Big Tech is born. The chosen name, Truthfor a president accused by many sides of distorting the truth, is already a program and its objectives are, as stated in all the documents of the company that owns the brand, the Trump Media & Technology Group (TMTG) deposited with the Secthe US commission that supervises listed companies, is to compete directly with Big Techthe large digital companies that Trump believes are guilty of limiting freedom of expression.

“TMTG – we read in the 2023 budget – was founded to fight big technology companies (Facebook, Instagram and Threads), X (formerly Twitter), Netflix, Alphabet (Google), Amazon and others who believe they are colluding to limit debate in America and censor voices that contradict their ideology woke. TMTG aims to safeguard public debate and open dialogue and to provide a platform for all users to express themselves freely.”

An aside: what it means woke. Before today’s negative connotation, with woke they defined themselves as activists who fought both in the streets and on social networks for the rights of minorities and women. Subsequently, the semantic use generated by the attitude of conservatives towards these movements prevailed which identifies the ideology woke in an intolerant dogmatism against those who do not have the same sensitivity towards minorities.

The attack targeting X. TMTG is not limited to general criticism, but accuses above all X, at least the one before Musk’s advent, to censor conservativesincluding Trump excluded from the social network, with the complicity of officials and politicians despite having – claims TMTG – allowed the Taliban to continue to express their opinions on their platform.

“X has long suppressed conservative speech (including at the behest of US government officials) through various means, including shadow banning, a surreptitious process in which users may not know that their posts are being hidden from other users.” According to TMTG, big tech companies have transformed themselves into arbiters of public discourse and organs of state-sponsored censorship, contradicting American values, especially the First Amendment.

“Their suppression of dissident speech constitutes today the most serious threat to free and democratic debate”. Hence the need for a social network like Truth.

A “different” social media. Truth, in addition to proclaiming its diversity in giving space to commentators, stands out above all due to eccentricity from a financial point of view because it does not want to accept the normal metrics that allow analysts and investors to measure the value and reach of its platform, as happens with other social networks through, for example, the calculation of active users or the average revenue per user.

And it does it more for its own opportunity and on the other hand, because otherwise it would appear tiny and insignificant compared to the giants with which it is compared.

Truth users. From its launch in the first quarter of 2022 through the end of 2023, Truth has collected 9 million users. Nothing if you consider that only in the United States, X says he has 92 millionwhich become 540 million globally.

“Investors – they hasten to write in the financial statements – must be aware of the fact that, since its inception, TMTG has not relied on any specific key performance metrics to make commercial or operational decisions. As a result, it did not maintain internal controls and procedures for the periodic collection of such information.”

According to TMTG, this is metrics valid only for mature operators and which would force Truth to have a short-term horizon, when the platform’s objectives are broader.

The quotation. Greater visibility on Truth’s numbers came instead with listing on the Nasdaqoccurred through the merger with Digital World Acquisition Corpa SPAC (Special purpose acquisition company) or one of those empty financial vehicles previously listed on the stock exchange with a lot of money in it ready to be merged with another company that intends to go public without having to go through an IPO.

The debut of the new group born from the merger took place on March 26th. Until January the titles of Digital world they traveled around the 13/14 dollars per share reflecting more or less the value of the 300 million in liquidity that the company had in its belly. From January, as the merger approached, the stock began to rise up to 50 dollars of the day before and to explode on the day of its debut, closing up 16%but also touching on the 70 dollarsbringing the capitalization to almost i 14 billion dollars.

The numbers are coming. On April 1st, however, the publication of the data for the fourth quarter and for the whole of 2023 brought a reality check to the stock, because, as we already knew, the numbers do not reflect or even suggest a rosy future for the business. TMTG ended 2023 with a loss of $58.1 million in front of revenuesmostly generated by advertising revenue, for 4.1 million dollars. Nothing.

The year before revenues they had been even less equal to 1.47 millionWhile the result was positive for 50 million thanks to an accounting reclassification of derivative products. On the accounts of 2023 they weighed operating expenses of 15.8 million dollars and the debt and interest expenses jumped to 39.4 million dollars for the maturity of a loan.

A shower of cash thanks to Digital world. Now liquidity will no longer be a problem for TMTG because by merging with Digital World it comes into possession of its own 300 million in cash. “We are thrilled to be operating as a public company and to have gained access to the capital markets. As the 2023 merger-related balance sheets close, Truth Social today is debt-free and has more than $200 million in the bank, which opens There are numerous opportunities to expand and improve our platform. We intend to take full advantage of these opportunities to make Truth Social the premier free expression platform for the American people.” These were the triumphant words ofCEO of TMTG, Devin Nunes who spoke of 200 million and not 300, because they must be removed combined losses of the two companies (Digital World and TMTG) which according to the pro forma data published in the Form 8k filed with the SEC amount to 100.7 million dollars.

Business continuity is at risk. There was no need for company auditors, Bf Borgers Cpa to understand that faced with zero revenues and continuous expenses, the sustainability of the company is strongly at risk. Also Twitter has never had mind-blowing numbers, but in 2021 before the acquisition of Elon Musk and when the numbers were still public, it had closed the year with 5 billion in turnover and a loss of 221 million dollars.

The value on the stock market. Yet TMTG which trades on the Nasdaq with the acronym DJTacronym for Donald John Trump, capitalizes approximately 7 billion dollarswhich lead to the former president owner of the 57.3% a fortune of 4 billion dollars which made him enter the ranking of the 500 richest men in the world calculated by Bloomberg.

The lock up. Trump certainly won’t be able to get his hands on the nest egg because it exists a lock clause up for him and the other shareholders which prevents them from selling the shares unless one of the following three conditions occurs: 1) have passed six months from the listing date 2) the closing price of TMTG ordinary shares is equal to or greater than $12.00 per share for 20 trading days within a 30 trading day period starting however at least 150 days after the listing date 3) the date TMTG completes a liquidation, a merger, a share swap or other similar transaction resulting in all TMTG shareholders having the right to exchange their common shares for cash, securities or other assets.

What does Trump’s loss as a shareholder mean? Trump’s possible sale of the securities would still end up taking away one of TMTG’s shares two assets on which he can count, the presence of the possible future president of the United States among the shareholders and the licensing agreement on his utterances. Having Trump as a shareholder reproduces the same condition for TMTG in the United States that it has had for years Mediaset in Italy: Offering publicity to the US president’s company suggests the same thing conflict of interest that Silvio Berlusconi has cultivated for years, generating that mix between politics and business that can hardly be contradicted. But it is also clear that if Trump were not a shareholder, many companies would lose interest in investing in advertising in Truth.

Trump’s exclusive for Truth. Regarding the exclusivity on Trump’s statements, TMTG has stipulated a license agreement royalty-free with the former president providing for the payment of 100 dollars at the time of signing and that this amount constituted full consideration and a fully paid royalty for the entire duration of the contract, valid until February 2, 2025, renewable for 180 days.

What does exclusivity consist of? “President Trump agreed to publish his non-political communications and posts on the Truth platform before publishing the same communication and/or posts on any other social media platform.” After six hours, communication can also go to other platforms. It goes without saying that being a politician, everything Trump says can be considered as such, so Trump’s freedom to choose where to direct his communication remains broad, even to the detriment of his society. In short, between the expiration of the lock up and the expiration of the exclusivity, the life and value of Truth will be decided between now and February 25th, via the American elections.


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