'Ugly in the extreme': Truth Social stock can be easily 'cratered' by cash-hungry Trump
With the merger between Digital World Acquisition Corp. and the Trump Media & Technology Group, the parent company of Donald Trump's Truth Social, completed on Friday, one Pulitzer Prize-winning business columnist suggested there are several red flags investors should consider before taking a leap of faith into another Trump venture.
In a piece for the LA Times, noted business columnist Michael Hiltzik wrote that there is a better than even chance that the cash-strapped Trump will be given a waiver to sell off a substantial portion of the reported $3 billion in stock he now controls by a board of handpicked Trump loyalists.
Stating that he is not giving investment advice, Hiltzik wrote that Truth Social's reported valuation of approximately $5 billion does not match up with its cash flow after three years.
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Proposing the question: "Would anyone in their right mind invest in this thing?" he suggested, "Probably not."
After writing, "It should be noted that SPACs in general don’t have the best reputation in the corridors of the SEC, because they could be used to execute initial public offerings without making the customary pre-IPO disclosures to investors," he added, "It should be plain that the valuation has no rational relationship with Truth Social’s financial picture, which is ugly in the extreme."
Elaborating he added, "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."
If that is not alarming enough, he noted the much-touted "lockup," stating the former president can't sell off stock for six months, is hardly as ironclad as it appears because of the Trump-sympathetic board overseeing the merged company.
"Of the 12 people Trump has nominated for the post-merger board, at least seven have personal ties to him," he wrote noting they include former Rep. Devin Nunes (R-CA), who left Congress to become chief executive of Truth Social, former Nunes aide Kash Patel, Donald Trump Jr., Scott Glabe, Robert Lighthizer — both former Trump administration appointees — and Linda McMahon who served as chair of Trump-linked America First Action super PAC.
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Suggesting they would be compliant if he pressed the issue of a sell-off, the business columnist explained, "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."
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