Another Trump Business Heading for Bankruptcy: Truth Social Lost $73M
Unlike other Trump Businesses like Casinos, Trump Water, Trump Steaks, and more than a dozen past businesses. Donald Trump’s past and current investors who have invested in the SPAC Digital World Acquisition Corp. (DWAC NasdaqGM) have lost hundreds of millions of dollars they invested and could end up losing another $188M.
Bloomberg Reports this morning that Donald Trump’s social-media business Truth Social, a division of his Trump Technology and Media Group (TMTG) generated just $2.3 million in sales in the first half of this year, which means it has lost $73 million since DWAC and TMTG agreed to merge. The two companies, TMTG and DWAC, have been struggling to complete a large merger due to an ongoing civil and criminal investigation by the Securities and Exchange Commission (SEC) into the founding of the SPAC and its agreement to merge.
This horrific financial report is literally the first in-depth look at how Trump Media & Technology Group is faring almost three years after its founding.
The financial results were disclosed in a regulatory filing Monday evening by Digital World Acquisition Corp., the blank-check firm trying to merge with Trump Media since late 2021.
The filing marks a win for DWAC investors who are still convinced the special-purpose acquisition company deal will close. The merger could’ve been terminated if the SPAC didn’t file the financials by Tuesday.
According to Bloomberg, the merger deal can still be canceled by either party through Nov. 21, though that seems less likely as the filing signaled Trump Media, which operates the Truth Social website, may run out of cash without the merger proceeds. If that deadline clears, the two still need regulatory clearance from the SEC and shareholder approval before a year-end target.
We at Wall Street Rebel and its affiliated investment newsletters WorldOpportunityInvestor.com and StrategicInvestment.com have made much money shorting the stock since last year. Opening new positions short positions on rallies and closing those positions on sell-offs.
We are currently 8,000 shares short in each of our publications at between $17 and $22 a share. DWAC is now trading at $15.70. The market cap of DWAC, even before the merger is approved, is $564.78M. Should the merger fall through, the most money returned to DWAC shareholders will be $376.52M, assuming DWAC has been holding potential shareholders' money safely in an escrow account and has dipped into the funds to facilitate the merger.
The financial filling by DWAC only addresses one problem. Either party can still cancel the merger deal through Nov. 21, 2023. The filing signals that Trump Media, which operates the Truth Social website, may run out of cash without the merger proceeds. That can only happen if the SEC clears the merger, which many, including Wall Street Rebel’s editors, consider a long shot. Keep in mind that the former disgraced president Trump is facing 91 felonies in four jurisdictions and could be criminally indicted in Michigan, Wisconsin, Arizona, and Wisconsin. Trump’s only chance of getting SEC approval may be his being found not guilty.
The $250M election fraud suit by New York Attorney General Letitia James could also bankrupt the former President. In addition, Trump faces dozens of multi-million-dollar lawsuits.
The SEC filing by DWAC notes it:
“may be difficult to raise additional funds through traditional financing sources in the absence of material progress toward completing its merger with Digital World.”
The filing points to these financial risks from the swirl of lawsuits against the former president and his almost total control of Trump Media’s voting stock. Operation risks included bot networks that could potentially disrupt Truth Social’s website.
Trump Media lost $7.6 million on its operations in the first half of the year, and interest cost them nearly $23 million, an increase of more than ten times from last year's. The company booked a $23.3 million loss from operations in 2022 on just $1.4 million in sales, though it recorded a $50.5 million profit after getting a boost from a change in the value related to its convertible notes.
The SPAC’s shares have been volatile since the merger was announced in October 2021, soaring as high as $175 a share before tumbling as low as $12.34 in March. A derivative tied to the merger’s success has plunged to $5 from an October 2021 peak of $79. The shares rose 5.3% to $15.98 in Tuesday’s session, while the warrants rose 9.5% to $5.33.
The proposed deal has been a political lightning rod and remains the longest-standing SPAC pact not to close after it was announced in October 2021. Investigations by the Justice Department (DOJ) and the US Securities and Exchange Commission have plagued it.
Representatives for Miami-based Digital World didn’t immediately respond to email requests for comment. A spokesman for Trump Media responded to requests with a posting on Truth Social that addressed some media coverage of the filing.
The company has been a favorite among retail traders both the long and short since the planned merger was announced, with hordes of investors posting on Truth Social and other social media platforms about the company. The SPAC has extended the deadline to complete the deal five times to give it until September of 2024 but is most likely going to see one or both parties back out of the deal.
A decision to kill the deal by either or both companies would reduce the share price value to $10 a share, which would be over a 33% drop from today’s $15.70 share price. In addition, DWAC has the $376.52M safely segregated. The editors of Wall Street Rebel suspect that DWAC may be short the required funds to refund investors. If its editors have expressed skepticism over DWAC's management competence and believe if the merger is canceled, investors could see much less than $10 returned to them. Keep in mind that Wall Street can be a treacherous place to invest. It’s no exaggeration to say DWAC could implode and fall to less than $10, even as little as .o1 per share. DWAC is still WallStreetRebel.com short.