Opinion: The stock linked to Donald Trump’s Truth Social platform is flying high. Read this before you invest.

Truth Social, his would-be Twitter rival, is a high-risk, speculative operation with few hard numbers behind it. It’s already the subject of subpoenas, from regulators and a grand jury, even though it’s barely off the ground. Oh, and Trump is not required to use the social-media site much — if at all — to communicate with the public, notably if voters were to return him to the White House. You buy the stock at your own peril.

That’s not me talking. That’s … er …  the new stock-market prospectus for Truth Social. It has just been filed here with the U.S. Securities and Exchange Commission.

In case you missed it, yes: Donald Trump is trying to come back to Wall Street.

He’s in advanced talks to list Truth Social on the stock market by merging its parent company, Trump Media & Technology Group, with a publicly traded shell company, Digital World Acquisition Corp.
DWAC,
+5.63%.

See: DWAC up over 15% as it moves to buy Trump Media & Technology Group — but here’s a potential snag

Trump faces mounting legal woes, as well as having a presidential campaign to manage. Meanwhile, Digital World has been in trouble with the Securities and Exchange Commission, and recently agreed to pay $18 million to settle fraud charges relating to this potential merger.

But never mind all this. Digital World Acquisition Corp.’s stock is suddenly flying high, as Trump heads toward the presidential nomination for the Republican Party — for a third straight time. The stock has tripled in price since the Iowa caucuses in January to $48, potentially valuing the business at $6.5 billion.

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

But the prospectus for the deal, which runs to nearly 600 pages, is a doozy.

It reveals all the reasons investors jumping on the MAGA train might want to think twice, or even three times, before taking the plunge.

“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,” recalls the stock-market prospectus. “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 what gamblers say, that the house always wins? Well, Donald Trump and his failed casino operation are your refutation.

Trump Hotels & Casino Resorts had trouble with the law on the way down, too. “On January 16, 2002, the SEC 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 the perceived, by them, 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 (while eschewing that word, former). You always know you’re buying a quality stock when the prospectus reads like a police blotter.

Then there’s the Truth Social deal itself.

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 people.

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. 

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, admits that it, too, would like 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. “[I]nvestors 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 the 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 even 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.”

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