Remember the movie, The Money Pit? This newest business venture of Donald Trump’s may end up being called The Money PIPE. Money is being sucked into this venture, like it was a black hole in space. As we speak, Digital World Acquisition Company, (which is merging with Trump Media & Technology Group and bankrolling them) values TMTG at approximately $1.6 billion. Now that’s pretty darn good for a company that 1) Has no product; 2) has no users and you’ll love this one: 3) has no revenue. What that translates as in real world terms, is that the tiny grassroots site you’re reading this story on is in reality making more money than Trump’s flagship social media platform, which is nothing but a static screen with an email list. When you think of it that way, you get a real sense of what a joke this is.
Pray let us continue. TMTG has no publicly identified executives, with the exception of its CEO, former congressman and fictional cow litigant, Devin Nunes. There is a substantial bipartisan rift in the way Nunes is perceived by his own party, where Kevin McCarthy spoke of the “gaping hole” Nunes’ departure would leave in the House of Representatives and what the Democrats had to say.
Devin Nunes has long been an embarrassment to California.
It’s only fitting that he now leaves Congress to debase himself even further to Donald Trump.
We look forward to supporting a candidate in CA-22 who will actually work for the people.
— California Democratic Party (@CA_Dem) December 6, 2021
So that’s the CEO. The rest of the team at this point, the Chief Product Officer and Chief Technology Office are only identified by a first name, Billy B. and Josh A., respectively, and that’s with the caveat that the “Technology Team” is “Subject To Change,” according to Popular Information. which called Trump’s media company “a $1.6 billion dollar mirage.”
Writing in Bloomberg, Matt Levine concludes there is “almost no sign that TMTG is actually building a social network or a streaming platform or anything else.” Nevertheless, TMTG projects 121 million monetizable users and $3.6 billion in revenue by 2026. (In 2021, it more conservatively projects $1 million in revenue.)
Will TMTG’s rosy predictions come true? It seems very unlikely. But, critically, Trump does not have to meet these projections — or even stand up a real company — to make lots of money.
We have followed Matt Levine’s assessment here before.
I AM NOT GOING TO PRETEND TO MAKE A BUSINESS CASE FOR [A TRUMP SOCIAL MEDIA NETWORK]—THERE IS A LONG HISTORY OF HILARIOUS FAIL
URE IN THE “SOCIAL MEDIA FOR TRUMP” CATEGORY—BUT MAYBE YOU CAN. IT IS NOT A SURE THING, IN ANY CASE. MAYBE IT WOULD WORK, MAYBE IT WOULDN’T. WHEN TWITTER INC. WENT PUBLIC, IT HAD NEVER BEEN PROFITABLE, AND IT WAS, YOU KNOW, A REAL SOCIAL NETWORK THAT PEOPLE USED. MAYBE TWITTER BUT TRUMP WOULD IMMEDIATELY BE PROFITABLE, BUT BOY, I HAVE SOME DOUBTS. ON THE OTHER HAND, IF DONALD TRUMP LAUNCHED A COMPANY THAT WAS LIKE, “I AM GOING TO START A SOCIAL MEDIA PLATFORM FOR TRUMP FANS,” COULD HE GET PEOPLE TO BUY THE STOCK? I THINK THAT TWO FUNDAMENTAL LESSONS OF THE LAST FEW YEARS ARE:
1. YOU CAN GET PEOPLE TO BUY ANY STOCK; AND
2. DONALD TRUMP CAN GET PEOPLE TO BUY ANYTHING.
SO IF DONALD TRUMP ANNOUNCED, “HEY, I’M GONNA DO A SOCIAL MEDIA COMPANY, BUY SOME STOCK,” PEOPLE WOULD BUY SOME STOCK. AND THEN HE’D GET A LOT OF MONEY. AND THEN IF THE SOCIAL MEDIA PLATFORM DID NOT END UP BEING PROFITABLE—AS I CANNOT IMAGINE IT WOULD BE!—THEN HE WOULD, UH, STILL HAVE THAT MONEY? AND IF THE SOCIAL MEDIA PLATFORM DID NOT END UP BEING LAUNCHED—IF TRUMP AND HIS CRACK TEAM OF TECHNOLOGISTS JUST COULDN’T ACTUALLY BUILD A WELL-FUNCTIONING ONLINE SOCIAL NETWORK—THEN HE WOULD, UH, STILL HAVE THAT MONEY? AND IF THERE WAS NO CRACK TEAM OF TECHNOLOGISTS AT ALL, IF NOBODY EVEN TRIED TO BUILD THE SOCIAL MEDIA PLATFORM—THEN YOU SEE WHERE I AM GOING WITH THIS, RIGHT?
THE POINT IS THAT IF YOU LAUNCH A COMPANY WITH THE GOAL OF MAKING IT PROFITABLE, YOU HAVE TO, LIKE, HAVE A WORKABLE BUSINESS PLAN AND EXECUTE ON IT AND DEAL WITH A MILLION DIFFERENT OPERATIONAL COMPLEXITIES. IF YOU LAUNCH A COMPANY WITH THE GOAL OF SELLING A LOT OF STOCK, YOU HAVE TO GET PEOPLE TO TRUST YOU AND GIVE YOU THEIR MONEY. THERE IS SOME OVERLAP BETWEEN THOSE THINGS! BUT THEY ARE DIFFERENT THINGS!
There is no workable business plan. There is the goal of selling a lot of stock. That’s why Trump put together the PIPE, as Popular Information goes on to explain. And that’s where national security concerns come in.
The money PIPE
The SPAC deal, if it is completed, will earn Trump $10 a share. But the company is currently trading at over $40 a share. How does Trump capture even more of that cash as soon as possible?
While the merger is pending, a SPAC and its target have the ability to privately sell more shares to raise capital. This is called a Private Investment in Public Entity (PIPE). On Saturday, TMTG announced a $1 billion PIPE investment. These shares will be purchased at a substantial discount from the current retail trading price. That means Trump, before TMTG has a single product or subscriber, could collect $1.3 billion.
But who is investing $1 billion in Trump’s virtually non-existent company? TMTG does not say. They identify the source of the cash as “a diverse group of institutional investors.” The identity of the investors is critical in light of Trump’s future political ambitions. He may run for president again in 2024. What if, for example, the investors include the Saudi sovereign wealth fund?
The structure of the PIPE deal, however, suggests that these investors are less interested in influencing a future president than fleecing retail traders for a quick buck. Levine notes that typically “in SPAC mergers, the PIPE investors can’t sell their stock the day after the merger closes.” Rather, the PIPE investors need to wait “a couple of months.” In this case, however, “DWAC and TMTG have promised the PIPE investors that they’ll be able to freely resell their stock the minute the merger closes.”
In other words, there seems to be a real push by these investors to flip these stocks immediately. The investors, whoever they are, seem to be keenly aware that time is not on their side. They want to be able to cash out before anyone gets too much information about how the company actually performs.
It’s a deal that makes Trump money and the investors money. The people holding the bag will be retail investors paying premium prices for a mirage of a company because they like Trump.
That group includes Marjorie Taylor-Green (R-GA), who bought between $15,000 and $50,000 worth of DWAC on the day it announced its merger with TMTG. She paid somewhere between $67.96 and $175 per share. That means she’s probably already lost about half of her investment — and possibly a lot more.
I frankly don’t see this as being a national security concern, because I think this is going to go the route of Trump’s Atlantic City casinos. This is like a Ponzi scheme, timing is everything. If you get in and get out out at the right time, you make bank. If your timing isn’t so fortuitous, you can lose your shirt. But take a look at the reasoning about national security because it’s something we shouldn’t rule out, certainly. Bess Levin, Vanity Fair
Donald Trump’s new social media enterprise announced on Saturday that the blank-check company it set up to monetize the former president’s digital and political mojo has raised $1 billion—without identifying the members of the “diverse group of institutional investors” backing him.
Trump is a former occupant of the Oval Office and is likely to make another presidential bid in 2024. He had his hands on the national security apparatus once before and may well again. The identities of the investors who just tossed $1 billion his way are of interest because anyone able to buy their way into Trump’s good graces by plopping a bag of money on his desk could sway public policy—which makes Trump a national security threat.
As Tim O’Brien, who wrote a 2005 book about Trump’s con artistry, writes, it would be good to know, for example, if Saudi Arabia had invested in TRUTH Social, given the 45th’s president’s history with the country. For those with short memories, that includes defending Crown Prince Mohammed bin Salman despite U.S. intelligence agencies concluding that he approved the murder of Saudi dissident and U.S. resident Jamal Khashoggi. (In related news, Trump’s son-in-law, Jared Kushner—also a huge fan of the the crown prince—is reportedly in talks to raise a significant sum of money from the kingdom for his own investment firm.) It would not be difficult at all to assume the Saudis—or whoever else has given Trump money—views the investment as a downpayment for bad behavior that they could cash in on should Trump make his way back to the White House.
There’s also the matter of Trump having a huge amount of debt to pay down, making it even more likely that he would take money from unscrupulous figures.
Trump’s indebtedness, his reliance on income from overseas, and his refusal to authentically distance himself from his hodgepodge of businesses made him a national security threat as president. That threat will reemerge if he seeks reelection in 2024. In the meantime, and with Trump still hunting for cash, the $1 billion he just raised through a “private investment in public equity” (or PIPE) must be happy news for the former president. After all, it is a significant multiple of the $293 million [that Digital World Acquisition Corp, the SPAC] raised when it went public in September. Perhaps that $1 billion merely signals that some investors believe Truth Social is going to be a big hit. Or maybe they’re buying access to Trump.
Or, maybe they’re simply looking to get rich quick. My take on this is that it’s going to be a truncated version of Atlantic City, six bankruptcies, three failed casinos, $69.5 million in defaulted payments to small-business subcontractors. And that’s only if Truth Social and TMTG gets off the ground to begin with. It may die on the drawing board. There’s only one thing you can depend on here and that is that this is going to become a Wall Street legend before all is said and done.