Donald Trump's latest windfall tops $5 billion as his social-media company's stock soars. But have investors read the fine print?

By Brett Arends

You know you're buying a quality stock when the prospectus reads like a police blotter

Shares in Donald Trump's new social-media venture, Trump Media & Technology Group (DJT), are skyrocketing. The company, which just hit Wall Street and which owns Trump's Twitter knockoff Truth Social, saw its stock jump another 12% Wednesday morning, hitting a fresh record of $65. The stock has risen about 75% in just over a month.

At current levels, the company is valued on Wall Street at nearly $8 billion, and Trump himself has made over $5 billion. At least on paper.

But do the investors buying the stock even know what they are getting into?

Have they looked at the fine print? Have they even looked at the company's own regulatory filings?

The company has no reliable financials. Repeat: No financials.

Donald Trump is not required to use the company's social-media platform, Truth Social, to communicate with his legions of follows - even if he is elected president in November.

This isn't just me talking. This is from the company's own filings. You can check them out here. They were published by the shell company DWAC ahead of its merger with Trump Media & Technology.

Opinion: Cha-ching! Trump makes $4 billion from his election campaign.

The prospectus, which runs to nearly 600 pages, is a doozy.

Trump Technology & Media Group "aspires to build a media and technology powerhouse to rival the liberal media consortium and promote free expression," the prospectus reads.

Total Truth Social sign-ups to date? Er ... 8.9 million.

In the nine months to September 2023, the business suffered a $10.6 million operating loss on just $3.4 million in sales.

Meanwhile, somehow it racked up $37.7 million in interest expenses.

Repeat: At the current stock price, Wall Street is putting a $9 billion sticker price on this baby. What's not to like?

If you want more financial details about Truth Social before investing, you are not alone. The board of Digital World, the would-be merger partner, admitted that it, too, would have liked more financial details.

Alas, Trump's business "did not provide the Digital World Board with TMTG's financial projections in connection with the Digital World Board's bring-down due diligence process," the board reveals.

Oh, well. Can't have everything.

Some of this may be because the people running Truth Social - led by CEO Devin Nunes, formerly a Trump-aligned member of the U.S. House of Representatives from rural south-central California - don't actually have too much data. "Investors should be aware that since its inception, TMTG has not relied on any specific key performance metric to make business or operating decisions," the prospectus reports. "Consequently, it has not been maintaining internal controls and procedures for periodically collecting such information, if any." My italics.

The Trump operation has chosen not to track these metrics. It reports: "At this juncture in its development, TMTG believes that adhering to traditional key performance indicators, such as signups, average revenue per user, ad impressions and pricing, or active user accounts including monthly and daily active users, could potentially divert its focus from strategic evaluation with respect to the progress and growth of its business."

Which is to say Truth Social didn't want numbers distracting it from its business. You could call this the Alternative Facts School of Business Administration.

But the real peach here is that, although investors are buying this stock in the hope that Donald Trump will do for Truth Social what he did for Twitter, there is actually no guarantee he will use it much, or at all. Even if he is elected president.

That's because, the prospectus reveals, Donald Trump's agreement with Truth Social is limited. Yes, he is required to post certain of his social-media messages there first. But only nonpolitical ones made from his "personal (i.e., non-business)" accounts. And the Truth Social exclusivity on each post only lasts for six hours.

Oh, and Trump can cancel this agreement with 30 days' notice, "at any time on or after February 2, 2025." In other words, shortly after Inauguration Day.

And even until then, who is to decide which social-media posts are political and therefore exempt from the exclusivity agreement? Guess.

"President Trump ... may post social media communications from his personal profile that he deems, in his sole discretion, to be politically-related on any social media site at any time," the prospectus warns. My italics.

It adds: "As a candidate for president, most or all of President Trump's social media posts may be deemed by him to be politically related."

As a result, it warns, investors "may lack any meaningful remedy if President Trump minimizes his use of Truth Social."

But at least you can fall back on the former president's long record of looking after his investors, right?

Alas.

"A number of companies that were associated with President Trump have filed for bankruptcy," the prospectus reminds investors. "There can be no assurances that TMTG will not also become bankrupt. ... A number of companies that had license agreements with President Trump have failed. There can be no assurances that TMTG will not also fail."

In case you've forgotten, "The Trump Taj Mahal, which was built and owned by President Trump, filed for Chapter 11 bankruptcy in 1991," the stock-market prospectus recalls. "The Trump Plaza, the Trump Castle, and the Plaza Hotel, all owned by President Trump at the time, filed for Chapter 11 bankruptcy in 1992."

Trump Hotels & Casino Resorts, founded by Trump in 1995, "filed for Chapter 11 bankruptcy in 2004," it continues. "Trump Entertainment Resorts, Inc., the new name given to Trump Hotels & Casino Resorts after its 2004 bankruptcy, declared bankruptcy in 2009."

You know how gamblers say that the house always wins? Well, Donald Trump and his failed casino operation are your refutation of that.

Trump Hotels & Casino Resorts had trouble with the law on the way down, too. "On January 16, 2002, the [Securities and Exchange Commission] issued a cease and desist order against Trump Hotels & Casino Resorts, Inc. (THCR) for violations of the anti-fraud provisions of the Exchange Act," the prospectus reveals.

I've written about Trump Hotels & Casino Resorts before. Ordinary investors, drawn to the stock by what they perceived as the allure of the Trump name, ended up relieved of their shirts, pants and shoes and were left standing on the Atlantic City boardwalk in their undergarments.

Yes, Trump himself pocketed millions. Stockholders pretty much lost everything.

From the archives (July 2015): Donald Trump was a stock-market disaster

Also read (March 2016): Donald Trump's business disaster is worse than you think

"Trump Shuttle, Inc., launched by President Trump in 1989, defaulted on its loans in 1990 and ceased to exist by 1992," the prospectus continues, referring to the short-haul airline. "Trump University, founded by President Trump in 2005, ceased operations in 2011 amid lawsuits and investigations regarding that company's business practices."

This, let me remind you, is not the fake-news liberal media talking. It's the stock-market prospectus for Trump's own current business.

"Trump Vodka, a brand of vodka produced by Drinks Americas under license from The Trump Organization, was introduced in 2005 and discontinued in 2011," it goes on. "Trump Mortgage, LLC, a financial services company founded by President Trump in 2006, ceased operations in 2007. GoTrump.com, a travel site founded by President Trump in 2006, ceased operations in 2007. Trump Steaks, a brand of steak and other meats founded by President Trump in 2007, discontinued sales two months after its launch." Two months.

But Truth Social will be different, right?

There is also a long section in the prospectus listing all of the former president's current legal troubles (all the while eschewing the word "former"). You always know you're buying a quality stock when the prospectus reads like a police blotter.

Trump will own at least 58% of the stock in the new company, giving him total control and leaving minority investors with nothing but hope. What could possibly go wrong?

-Brett Arends

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03-27-24 1216ET

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