Donald Trump needs cash. The once-and-possibly future president owes over $450 million after a New York judge found he defrauded banks by inflating the value of his assets to secure favorable loans. He also owes $83.3 million from the E. Jean Carroll defamation ruling, $110,000 for defying a subpoena, and $15,000 for disparaging a law clerk. And his bills from fighting so many disparate criminal and civil court battles are adding up; last year alone, the former president funneled $50 million from two of his Super PACs to his legal defense.
In court, Trump’s lawyers insinuated that he doesn’t even have $450 million—not in cash, at least, unsuccessfully appealing to get the penalty lowered to a $100 million bond. So, where is Trump going to get all of this money? Oddly, the answer might lie in Truth Social, the social media app that Trump and his associates started after he was summarily booted from Twitter (now X) in the aftermath of the January 6, 2021 insurrection.
Trump’s financial future now hinges on some of the strangest fads in corporate finance—meme stocks, SPAC deals, and cult-of-personality investing. If Trump can find a way to act fast, it might just be the bailout he desperately needs.
Truth Social is a bad imitation of Twitter, where Trump was an unavoidable presence long before he ran for president. It’s chock full of stale red-pilled memes, MAGA conspiracy theories, and of course, Trump. That’s the main draw. Truth Social is the only place the former president now regularly posts his unfettered thoughts.
Unsurprisingly, Truth Social hasn’t found mass appeal. It had a paltry 5.4 million total visitors last month, according to Similarweb, and made only $3.4 million from advertising in the first nine months of 2023, according to a regulatory filing by its corporate partner. (For reference: Twitter made more than $1 billion in advertising with 237.8 million daily users in its final quarter as a public company in 2022.) Truth Social’s ads aren’t from, er, prestige brands either—a recent scroll through the app surfaced ads for a “Trump signature trading card,” the website gutcleanseprotocol.com, and Covfefe brand coffee.
But because of a quirky bit of financial engineering, and maybe the power of Trump’s hyped-up political base, Truth Social’s parent company is set to go public in the coming weeks once it merges with Digital World Acquisition Corporation, a deal that would bring the merged company’s valuation to around $9 billion—a market capitalization on par with Match Group, Skechers, and Lufthansa. Trump’s own stake would be worth nearly $4 billion at current value, which would comfortably cover his current legal expenses.
Truth Social is owned by a company called Trump Media and Technology Group. It is not going public through the traditional method—an initial public offering, or IPO—but through an alternative route called a SPAC, or special purpose acquisition company. SPACs are blank-check companies that have no business but are allowed to go public and then merge with a real business in order to help take it public.
Typically, “a company has been operating for a while, and you have years of financials, and an investment bank looks it over, and there are all of these public filings, and then it goes public in this fairly rigorous process where the investment bank is strictly liable—it’s on the hook for anything said that’s a lie, basically,” said Usha Rodrigues, a professor at University of Georgia School of Law. But Truth Social wasn’t even a functioning business when the merger was announced in October 2021—the social media app didn’t launch until February 2022.
Michael Ohlrogge, a professor at New York University School of Law, says that SPACs aren’t necessarily an easier path to going public. “This has been an extremely slow, expensive, uncertain process with an enormous amount of scrutiny from the SEC,” he said in an email. He suspects that a big, established investment bank wouldn’t have wanted to take on the “liability and reputational risk” of doing an IPO for this merger, but a less prestigious bank may have.
SPACs were trendy back in 2021 when the deal was announced. In the early-pandemic bull market, SPACs (which Date back to the early 1990s) had a resurgence in popularity, taking companies like DraftKings, SoFi, and Nikola Corp. public.
Michael Klausner, a professor at Stanford Law School, says that the “share price of many, many SPACs—for a period of time around their merger—is out of line with their true value.” But he’s seen SPACs bought up by retail investors—just because they’re SPACs—and driven far above their value, only to descend when the hype dies down. “Very, very few are up now.”
Still, the Trump Media deal is significantly stranger. Its SPAC, called Digital World Acquisition Company, has effectively given investors a way to invest in Trump—and it’s given Trump a way to capitalize on his own brand.
DWAC is best thought of as a meme stock. You may remember the meme stock fad from when retail investors on Reddit successfully coordinated a short squeeze with GameStop stock, before glomming onto a series of other millennial nostalgia brands like AMC Entertainment, BlackBerry, and Bed Bath & Beyond. Meme stocks are often publicly traded companies that attract an inordinate percentage of individual investors and their stock performance fluctuates in a way that’s significantly divorced from the reality of their underlying business. Combine those two trends and you’ll start to see why Trump’s media company could be valued at roughly $9 billion if it merges with DWAC.
Jay Ritter, a finance professor at the University of Florida, says meme stocks often depend on the “greater fool theory of investing,” meaning rational investors might buy in expecting the stock price to rise and betting that they can sell their shares to a greater fool willing to buy them at a higher price. In this case, however, Ritter speculates there is an inordinate number of individual retail investors compared to institutional investors, such as hedge funds, that normally own SPAC shares prior to a merger. “Here you’ve got ideology involved [too]—as far as I can tell, the vast majority of DWAC investors are Trump political investors, and they’re to some degree putting their money where their mouth is… My suspicion is most of them have bought the stock as a show of political support.” In this way, Trump is conducting yet another public fundraising from his supporters—this time through the public markets.