Shares in former President Donald Trump’s social media platform Truth Social will likely be available for public purchase by the end of this week, courtesy of its newly approved blank-check merger with a little known publicly traded company, Digital World Acquisition Corp. The combined company will take the name of Trump’s media outfit and its stock symbol will be Trump’s initials — DJT.
A chance to buy a piece of Donald J. Trump? Common sense says this is one to stay away from, even if the newly combined company is likely to be initially valued around $5 billion on paper. The man is a serial bankrupt with a reverse Midas touch. And that’s before you remember Truth Social, founded by Trump after he got tossed off Twitter, is the black hole of social media sites, with a fraction of the users of its more popular rivals.
The man is a serial bankrupt with a reverse Midas touch.
But it’s unlikely Trump fans will heed my advice. His supporters believe in him with the fervor of cult members. Nothing seems to deter the most ardent, including his loss of the 2020 election, his support for the Jan. 6 rioters, suggesting Covid patients be injected with bleach, or a New York civil court ruling that he’d engaged in business fraud. And now they’ve turned Digital World Acquisition into the latest meme stock — it’s up by more than 100% this year. Perhaps in a sign of things to come, as of Saturday it had fallen almost 6% since the merger was announced.
Most of us invest in stocks for one major reason: We want to make money. But that’s not necessarily the case for investors in meme stocks, those companies that took off during the pandemic not because their financial fundamentals were sound, but because fans turned investors talked them up on Reddit boards. There is frequently a different calculation at work for this particular strain of stock market gamblers.
Many of these investors came to believe they could make money while simultaneously waving a giant middle finger in the face of power, whether that’s Wall Street hedge fund traders shorting GameStop or AMC, or, in this case, authorities attempting to put a stop to Trump’s serial financial shenanigans and crimes. That dual goal leads them to engage in “motivated reasoning.” Almost no investor, be they a Wall Street mogul or a small timer the industry sometimes calls “dumb money,” wants to lose money. They simply convince themselves it’s an unlikely result, no matter how bad the fundamentals look.
If retail investors planning to buy into Truth Social did disinterested research, they would hardly be investing in the site. Popular it’s not. It has an estimated 5 million active users. X, formerly known as Twitter, by comparison, has an estimated 500 million. (Facebook, if you are wondering, is in the billions.) Truth Social’s revenues are, not surprisingly, paltry.
Moreover, going public via a special purpose acquisition company, or SPAC, is hardly a surefire financial bet. While some SPACs do just fine — hello, DraftKings! — many do not, something that should hardly come as a surprise when you realize that one major reason for going public in this fashion versus a traditional initial public offering, or IPO, is that the companies involved don’t need to reveal as much financial information to their investors. No surprise, Bloomberg flagged $46 billion in potential losses as a result of 21 pandemic-era SPACs declaring bankruptcy in 2023.
But Trump is highly unlikely to be among those getting hosed — even if the deal isn’t ultimately quite as wealth inducing as it would seem. At Digital World Acquisition’s current stock price, Trump is set to gain $3 billion. But that’s, for the time being, paper money. The company — in common with other SPACs — will not permit insiders to sell or borrow against shares for a six-month period after going public. And at the six-month mark, it’s quite possible that $3 billion number will be lower — much lower — than it is right now. Trump is highly unlikely to be among those getting hosed — even if the deal isn’t ultimately quite as wealth inducing as it would seem. That lockup period also means the deal is highly unlikely to solve Trump’s short-term financial woes. He won’t be able to use it to, say, guarantee a bond to cover the $454 million civil fraud judgment rendered against him in New York last month while he appeals the verdict. Yes, Trump could seek a waiver, and no, I wouldn’t be surprised to see him try. But he’s highly unlikely to get it, given it could raise questions about the stock in the minds of retail traders and, more importantly, leave the company’s officers open to shareholder lawsuits. If he’s looking to quickly dump shares, why would anyone else except the truest of true believers want them? But the long-term odds look good for Trump. His fans will likely continue to pile into the stock, keeping the share price higher than it would otherwise be. If they hold on until he sells, he’ll make another fortune, even if it’s not quite $3 billion, while they’ll once again get stuck holding the bag when the price almost certainly crashes to Earth. And one other thing worth noting: If he’s once again elected president, Truth Social could prosper as ad buyers, well, buy ads, a way of currying favor with the White House. All he would need to do is open the app and scroll his feed. And if you think this wouldn’t happen, recall how both foreign government officials and domestic lobbyists alike booked pricey stays at Trump’s Washington hotel while he was president. And all of this will likely boost Trump’s appeal with his supporters. They’ve never objected to his financial dodginess. If anything, it’s part of his appeal — in their eyes, he’s the guy who is smart enough to outsmart the system. Despite the fact Trump is a man who cosplays as a self-made mogul with his dad’s money, stiffed numerous tradespeople working on his eponymously named casinos and hotels, and sold his fans on dubious multilevel marketing schemes, his fans won’t see the truth: Trump is not only a serial fraud, he is one who takes advantage of those who believe in him the most. Stock trading on the ironically named Truth Social is highly unlikely to change that sad fact.
Helaine Olen
Helaine R. Olen is the author of "Pound Foolish: Exposing the Dark Side of the Personal Finance Industry" and a co-author of "The Index Card: Why Personal Finance Doesn't Have to Be Complicated." She has been a columnist for The Washington Post and Slate, and her work has appeared in numerous other publications, including The New York Times and The Atlantic. She is managing editor of the American Economic Liberties Project. 
