Will Trump ‘Take His Investors To the Woodshed’ To Save Himself? You Can Count On It

The suspense is building. It’s Saturday. Donald Trump’s day of reckoning is Monday. The big question is, will he gut Truth Social, meaning will he get a waiver from the likes of his eldest son and crony Kash Patel to forego the six month waiting period and cash in early? Seems like a no-brainer, of course he will. But what if there’s squat to cash in on? Aye, there’s the rub. And as you gathered from the headline, and from the fact that Truth Social stock plunged on Friday, right after the merger of DWAC with the SPAC, this is far from a rosy parachute coming to break Trump’s fall at the last minute when Letitia James is ready to start seizing properties.

The Trump deal, which has been percolating for more than two years, looked from the first like a potential high-water mark for SPAC-related investment scams, as I wrote in 2021.

The merged entity is expected to be priced at a valuation of about $5 billion. As 60% owner of the entity, Trump would stand to own about $3 billion in shares.

It should be plain that the valuation has no rational relationship with Truth Social’s financial picture, which is ugly in the extreme.

In a prospectus issued last month, DWAC disclosed that Truth Social collected a mere $3.4 million in revenue during the first nine months of 2023 and booked a loss for that period of $49 million.

The $5-billion estimate of the merged company’s value derives from the interest being shown mostly by small investors enthralled by the likely Republican presidential candidate as a political figure and celebrity.

Truth Social is a meme stock, deriving its *value* from the popularity of Donald Trump, rather than any viability as a social media site. It’s a tacky looking thing. If you’ve never looked at it, I suggest you do. It’s very amateurish compared to Twitter and it’s also very limited. Twitter, for all its faults, has a wide range of people and interests. You can find some excellent commentary on Twitter. Journalists used it early on to have an outlet whereby to build reputations by banging out copy right there on the spot during special events.

Then professionals of all stripes showed up and there is first rate legal commentary and analysis as well as insight from business professionals. I’ve read scientific analysis on Twitter. Nothing like that exists on Truth Social. It is right-wing anger, Trump spewing his daily bilge and his cultists responding with their favorite photos, memes, and jingoism. It’s like a middle school level imitation of a real social media site.

In any event, Trump and other principals agreed to a six-month lockup of their shares, meaning he couldn’t sell them or borrow against them until mid-September, but there is an escape clause, a waiver, that would allow him to act now and so the question is, how likely is it he will go that route?

Pretty likely, I’d guess. Of the 12 people Trump has nominated for the post-merger board, at least seven have personal ties to him. They are: Devin Nunes, who as a Republican congressman from California was an embarrassingly sedulous supporter of Trump, and who left Congress in January 2022 to become chief executive of Truth Social; Trump’s son Donald Jr.; Kash Patel, a former aide to Nunes and a member of Trump’s executive branch entourage; Scott Glabe, a former aide to Trump in the White House and Trump’s appointee to an important post at the Department of Homeland Security; Robert Lighthizer, U.S. trade representative under Trump; and Linda McMahon, the former CEO of World Wrestling Entertainment who became chair of America First Action, a Trump-associated super PAC, and is now chair of America First Policy Institute, a think tank devoted to Trump policies.

What are the chances that they would vote to thwart Trump’s need to turn his shares into cash? You be the judge. Keep in mind that any large-scale sale of Trump’s shares would probably crater the stock price and take his unwary investors to the stock market woodshed.

There’s another article you should read about the last time Trump took a company public and ended up cratering it. Now remember: Donald Trump is consistent and predictable. Past is prologue with him and after six bankruptcies, he’s got the same set up going right now as he had the last half dozen times. The only reason he’s not in Chapter 11 as we speak is because of the presidential election.

It turns out that DWAC shares on Friday closed nearly 14% lower than their opening price. When I wrote about it mid-day the figure was 11% but evidently it kept falling. So let’s turn back the clock to 1995 and see what happened then.

The Atlantic City, New Jersey, company lost money every year, but its stock prices did well — for a time. In the initial public offering, the company raised $140 million, selling 10 million shares at $14 each.

By 1996, the stock reached a high of $35 a share before plummeting later that year, in part because the company bought another casino for $100 million more than its estimated $400 million value, The New York Times reported in 2016.

The company, meanwhile, kept bleeding cash. The year the stock peaked, it lost $66 million. In 1999, it lost $134 million. And in 2004 — when the company filed for Chapter 11 bankruptcy protection and was delisted from the New York Stock Exchange — it lost $191 million, according to a CNBC review.

Trump, who was the company’s chairman and later CEO, continued making millions of dollars a year in salary and bonuses despite the heavy losses.

The business helped pay for aspects of his famously lavish lifestyle, including spending over $6 million to entertain guests on his plane and golf courses, according to The Washington Post report. He also used company cash to buy Trump-branded merchandise, including $1.2 million on Trump Ice bottled water, the report said.

This is how Trump handled his one and only publicly traded business before and he ran it into the ground. Now the stakes are even higher and he’ll almost assuredly take a quick infusion of cash, whatever he can get his hands on, and run Truth Social into the ground.

I suppose it’s possible that Junior and Kash Patel and his buddies will try to talk Trump out of doing something stupid but that’s a waste of breath.

Let’s just do this. Let’s see where DWAC opens on the stock market on Monday and let’s see where it closes. If the stock is still in free fall, Trump will cut his losses and take whatever money he can get. That’s my prediction. Just ask yourself this: who in their right mind would invest in Truth Social, knowing what we all do about the finances of the principal stockholder?

On Monday the ticker will be moving with DJT, which is what Trump called his hotel stock in 1995. And as I said the other day, there’s a reason that ships don’t ever name a second ship after one that sank at sea. You will find the Queen Elizabeth II ship, but you won’t find Titanic II. And Truth Social is Trumptanic II, where the stock market is concerned.

I think people will pull their money and run. Let’s wait and see. Or, maybe the cult will dig under their mattresses and find some cash to keep it afloat. We won’t be ruminating on this for very long. We will have answers.