May 20, 2024

Truth Social, the Donald Trump-backed social network, aims to attract an “open, free, and honest global conversation” on its platform “without relying on hostile Big Tech companies,” according to a new regulatory filing that offers a glimpse into the business. 

A major obstacle to fulfilling that mission: The app hasn’t yet attracted any paying advertisers, the filing with the Securities and Exchange Commission shows. And its parent, Trump Media & Technology Group, is losing money and “expects to incur significant losses into the foreseeable future,” the filing said.

In the short term, Truth Social appears to be banking on an agreement that could help bolster its user base: It will have a six-hour exclusive window on Trump’s messages, according to the filing. That means even if Twitter lifts its ban on Mr. Trump — which Tesla founder Elon Musk said he will do if he completes his proposed acquisition of the media company — there could be an hours-long lag before his comments appear on the blogging platform or other forums.

“President Trump has agreed not to compete with Truth Social for his own benefit,” according to the filing from Digital World Acquisition Corp. (DWAC), which is merging with Trump Media & Technology Group, or TMTG. The filing is a registration statement, or S-4, with the SEC about the proposed merger.

To be sure, Mr. Trump is no mere user of the Truth Social — he will serve as chairman of the new company following the merger and stands to profit from its success given that he’s also a major shareholder. In turn, TMTG said that in order to succeed it needs Trump to attract “millions” of his supporters to register for, and regularly use, its platforms.

The real test may be whether Truth Social can transform a six-hour head start on Trump’s messages into revenue — so far, ad sales are nonexistent, according to the regulatory filing. The company hasn’t yet started charging advertisers, and it may not book any ad sales from Truth Social until 2023, the filing said. 

Whether advertisers will open their wallets for Truth Social in the long run remains uncertain, with many advertisers preferring to sidestep content seen as overtly political or controversial. Still, investors were cheered by the S-4 filing and the companies’ disclosure that the merger will occur in the second half of 2022, providing TMTG with $1.25 billion in net proceeds, the companies said in a joint statement issued Monday. 

Shares of DWAC rose $3, or 7%, to $44.98, in Monday afternoon trading.

Unbelievable loophole?

Truth Social’s rights to Trump’s posts has some limits. For instance, the licensing agreement allows the former president to post messages from his personal profile that relate to political messaging, fundraising or get-out-the-vote efforts on any social media site at any time,” according to the filing. 

That’s a fairly wide loophole that could potentially lessen the impact of Truth Social’s exclusive on the former president’s messages. So far, Trump hasn’t been terribly prolific on Truth Social, posting 95 “truths” — the site’s terms for messages — since the service began operating earlier this year.

Elon Musk says he would reverse Twitter’s ban on Donald Trump


In the meantime, TMTG said it will use the $1.25 billion in proceeds to continue developing the platform. In an investor presentation last year, the company said it expects 56 million users by 2024, which it believes will help it generate sales of $835 million.

For now, the company has a long way to go: In 2021, TMTG booked just $2.1 million in “related party” sales from a “licensing agreement with one of the stockholders,” although the filing doesn’t provide additional details. It lost $59 million last year. 

Among the filing’s 66 pages of potential risks for investors are several related to Trump, including if he “were to cease to be able to devote substantial time to Truth Social.” Trump’s death, incapacity or harm from “numerous” lawsuits also could impact the company’s success, the filing warns. 

And it flags Mr. Trump’s prior track record running businesses: “A number of companies that were associated with President Trump have filed for bankruptcy. There can be no assurances that TMTG will not also become bankrupt.”

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