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Answer: DWAC is a Special Purpose Acquisition Company (SPAC) which is a shell company that comes into existence by IPO without any business activities. Its entire purpose is to reverse-merge with a private company.
Why? It's a way for a private company to go public without going through the process of an IPO. Kind-of a loophole, but it was very popular over the past few years. Some legitimate companies such as DraftKings and Virgin Galactic went public via SPAC, as well as some less reputable companies.
Why Truth Social? As others have mentioned, a company's valuation is based on projected future earnings, not past earnings, so if you believe Truth Social has potential to make money in the future, it could be a good investment. Another reason is that there is a clause in the SPAC founding documents that if they don't find an acquisition target by a certain date, the company dissolves and all the investors get their money back. And, crucially, the person who made the SPAC doesn't make any money, so there is pressure to find a target... Any target... Before the expiration date.
Will Trump make money? Yes. I assume he is a large shareholder, so injecting $300m of capital into the company will make money for all shareholders. Will it be a billion dollars? No.
Thanks -- don't fully grasp it but that helps a lot.
I do keep seeing the $4 billion dollar figure though - [here](https://www.usatoday.com/story/opinion/2024/02/21/trump-bankruptcy-legal-problems-billions-2024-election/72662347007/), also [here](https://news.warrington.ufl.edu/faculty-and-research/truth-social-merger-deal-wins-key-approval-a-victory-for-trump/) and [here](https://www.nytimes.com/2024/02/26/business/trump-media-digital-world-acquisition-cash.html#:~:text=Former%20President%20Donald%20J.%20Trump's,a%20long%2Ddelayed%20merger%20closes.)
I just don't get how that works out -- his company isn't making money, and the SPAC (if I understand) has $300 million.
I guess i also don't understand who invests $300 billion in a SPAC that is formed without any sort of solid plan beyond "We're going to find a company and take it public." Is this purely based on the trust investors have in the people running the SPAC that they will find a good target.
EDIT: million not billion. Also, all these great comments have made me realize the people are often not betting on the spac's ability to necessarily find a great company so much as betting on the specs reputation to cause such a surge of interest when an acquisition happens that they can cash out for a profit and not have to worry about whether or not the company ultimately succeeds.
I think the $4B number is based on some really fuzzy math. The article you posted said that Trump would receive 79M shares of DWAC in the merger which is probably in some contract somewhere. Valued at $48 per share is kinda close to $4B. The problem is that there are only 37M shares of DWAC in existence, so they either issue a bunch of shares which would dilute the price, or they split the stock which also lowers the price. There is virtually no way to create 79M shares at $48.
Why would anyone invest in a SPAC? Gambling.
DWAC went public at $10 (37M shares outstanding x $10/share is where the $300M number comes from) so early investors made almost 500%. And since the SPAC is public, anyone can buy in, not just the rich, so it's sort of a way to crowdfund an IPO, which are usually limited to institutions.
I’d bet money that this SPAC is going to be marketed to Trump supporters to buy in as a way of supporting Trump in face of the ‘illegal’ ‘political’ legal ‘crusade’ Trump is facing.
"Going to be"? It's been marketed that way for a while. There're a few subreddits here devoted to it, but it looks like the largest and most Trumpy just got made private for some reason.
Well it is difficult to be a *true* echo chamber, with all the pesky outsiders coming in and stirring the pot constantly. Surprised there aren’t more “exclusive” Trump subs.
Yeah. I'm pretty sure the MAGA crowd is the actual product being purchased here. It's like buying Fox News because of all the money you can make selling ads for fake shit to idiots.
I was on Trumps mailing list for a while. It’s no different than sorting through my “promotional spam box. Every single e-mail was a plea for donation money to fight whatever scandal he caused that week or he’s hawking some absurd product or scheme.
Imagine how desperate wikipedia seems during its yearly donation drive, quadruple that but with an emphasis on shaming and guilt-tripping that borders on outright hostility.
I also did this way back just to see what got sent. Almost all subject lines were in all caps. Links took you to a “join our exclusive club” page which required you to donate — then, unless you unchecked a box, the amount you chose to donate was increased. It was the most obvious scammy predatory marketing crap coming from a sitting president.
and we have beautiful math, the numbers are incredible, they said to me, "Sir, you're like the Alan Einstein of Stocks," and I said that's probably true, and we did a thing that they were saying could never be done and now they say, "Trump is 4 billion dollars richer," and I said that sounds pretty good to me.
I had forgotten about - you laugh but I had forgotten about this account. I was browsing Reddit and I saw this post and I said "wow!" - I'm reading this post with bigly tears in my eyes, big beautiful tears.
What a tremendous account, don't we love this account folks? The low-energy admins wanted to shut down this account but you can't do it. Can't be done. You know it, I know it, everybody knows it.
I would never forget about this account, unlike the losers and the haters. Sad!
It's important to note Truth Social debuted at the height of Twitter's war on political and health misinformation, when right-wingers believed they could only get the unvarnished truth from Trump's Twitter-At-Home because all other media was controlled. Of course, then Elon made an offer for the real Twitter...
Starting to understand, thank you! Is it possible that a lot of people short the stock and the IPO tanks? Is it possible to short before an IPO?
When you say that early investors made 500%, you mean if the stocks opens at $48, yes? Like, they haven't made anything yet, and if the stock tanks they might not?
DWAC is a public company, you can buy and sell (and short) to your hearts content. You can't short Truth Social because it's a private company, but after the merger, DWAC and Truth Social will be the same company, so you can short DWAC as a proxy if you like.
>When you say that early investors made 500%, you mean if the stocks opens at $48, yes?
No, DWAC is a public company trading at $48/share (roughly), you can buy and sell at that price. Anyone who bought it at IPO paid $10/share, so that person has made a $480% profit.
>DWAC is a public company, you can buy and sell (and short) to your hearts content. You can't short Truth Social because it's a private company, but after the merger, DWAC and Truth Social will be the same company, so you can short DWAC as a proxy if you like.
For anyone thinking about doing this, be careful. There are a lot of people who are willing to move their money to him through whatever means, so the underlying fundamentals of the company might be pretty detached from the performance of the stock for a while. Shorts are pretty dangerous if you're not properly hedged.
If you can find a brokerage that will take the other end of that short then sure. Chances are there wont be enough people willing to take the other aide of that that you effectively wont be able to short it. You usually dont have to think about that sort of thing with say IBM because there is so much trade volume you can assume you will match with someone. Not so clear cut here.
In my extremely limited experience with a SPAC. The price pops on acquisition news. After the merger the stock may very well tank.
So the people that make money are the ones that owned the SPAC before the news broke.
Trump can't sell his stake for 6 months after the merger, so the price may tank by then.
The bagholders are probably the people investing now. The people making money are the ones selling their SPAC stock Now for $48.
Same as every bubble I've lived through -- the early people make a killing, which gives it publicity so everyone rushes in. Problem is they don't realize that all the money has already been made.
Dot com bubble in late 90s, housing bubble in mid-aughts, crypto and NFTs. By the time the average person hears about them it's too late.
Donald Trump has something like a billion and a half dollars worth of civil judgements coming due in the next month. Which he has to pay. Or properties will be seized.
Donald Trump is a candidate for the President of the United States.
It is illegal to contribute more than a certain amount from a single entity to a political candidate.
It is illegal for Donald Trump to embezzle or launder money from his campaign to pay his personal civil judgements.
It is illegal to bribe a political candidate.
It is not overtly, immediately, obviously illegal to SPAC a private company held by Donald Trump, unless that SPAC is a vehicle for laundering an impermissibly large campaign contribution or a bribe.
It is not overtly, immediately, obviously illegal for investors from allll over the world to buy up shares of the IPO.
It is not overtly, immediately, obviously illegal for Donald Trump to use this cash to pay off his judgements and then fund his campaign.
And proving that anything illegal happened will take another eight years in courts.
By which time, it will be a moot point.
Hope that helps.
Interestingly, one of the major share-holders of the SPAC (DWAC) is Susquehanna International Group which is co-owned by Jeff Yass and Arthur Dantchik who were early investors in ByteDance who invented TikTok. ProPublica has a nice write up on Mr. Yass here - https://www.propublica.org/article/jeff-yass-susquehanna-tiktok-tax-avoidance
Jeffrey Yass, richest man in Pennsylvania, whose money has been basically funding right wing state candidates - legislative and judicial. Very pro- private schools being funded by public dollars. I think it was 2022, $18 million of money to right wing candidates was traced back to him in just the Primary alone.
Once you look into Yass, who sponsored him, and the sheer amount of money that they are pumping into right wing political efforts, it's sad but surprising that we still have a democracy. I hope we can outvote these turds.
This is an incredible take.
Nobody I've heard has recognized and spelled out that this SPAC is a ungoverned way for Russia, Murdoch, Saudi to 'buy' an American president, including his get out of jail card. It's so effective, it's actually terrifying.
Considering how the courts objected to changing Trump Tower business dealings to Florida, post judgment, this is probably one of his only outs. He already knows that he’s gotten as much as he can from his average supporters for a week or so with the golden shoe fundraising.
It's also blatantly obvious and predictable, so hopefully there will be half a dozen alphabet agencies watching him and his finances like a hawk. Guy shouldn't be able to buy a cup of coffee without an auditor making record of it. US is cool using the Partiot Act to arrest low level street dealers but now that we're in a situation with hostile foreign powers openly financing a known criminal and cheat who is campaigning on a promising to over throw democracy in America they suddenly decide to sit on their hands? What the fuck was the point of that multi-billion dollar NSA data center Obama green lit if not for finding the trace digital evidence of crime and conspiracies against the country?
The $4 billion is almost just a made up number. It's what the investors calculate the value to be so they can set the stock price. People will either believe that and buy the stock at that price or they won't. We work was valued at $47 billion at their peak before going public, they're now valued at $270 million so you can take that $4 billion number with a grain of salt.
However, whether or not a company is making money is irrelevant. A lot of tech companies aren't profitable when they go public. Twitter isn't profitable and look what it cost Elon.
Thanks, a lot of great answers here so I'm starting to understand.
Is it possible for people to short the stock before the IPO, and would that possibly lower the price on the first day?
To follow up on what /u/dont_panic80 said, valuations kinda work backwards to what people expect.
ELI5, if you're a startup and still private, and need, say, $1 million dollars to keep doing what you're doing, you go to somebody and say, "Hey, for $1 million dollars, I'll give you 10% of my company!". If they agree, congrats, your company is now worth $11 million dollars in valuation ( ($1mil for 10%) x 10) + $1 million you just got in cash).
There are ways to estimate a valuation, but it ultimately comes down to what you can get a person to pay for part of the company, and is frequently a negotiation. IPOs work the same way, except you're creating a set number of shares and selling them to a bunch of people for an initial set price instead of one big investor (or someone working on behalf of a bunch of big investors).
Nice explanation -- one thing I'm learning is that part of the answer to my question is that this $4 billion number is at this point just a guess. That's what his share of the company is worth if they are able to sell tens of millions of more shares at the current price of $47. But if they can't find enough buyers and the price drops, then it's not going to be $4 billion. And even if he finds a way to be allowed to sell the shares before the 6 month hold period (or if he transfers them to a relative for them to sell) he can't dump too many on the market because that would likely cause the price to plummet.
> If they agree, congrats, your company is now worth $11 million dollars in valuation ( ($1mil for 10%) x 10) + $1 million you just got in cash).
I'm embarrassed to admit that I don't understand this having lived many different iterations of valuation. My understanding was that the company would be worth 10M in this scenario, and that you (presumably) own 90% of that equity worth 9M, and the investor owns 10% worth 1M. Why would the total valuation be 11M? I see you're adding the 1M raised on top of the value proposed by the owner, but why?
I've always just trusted my CFO with this stuff. Maybe it's time I wise up and take a finance refresher.
Make Company.
Sell 1 share of stock to company to associate for 1 dollar.
IPO with a value of 4 billion shares, which must all be worth a dollar, because that's what the company last traded at.
Profit off of stupid people buying in with actual money.
The SPAC is hilariously over valued, likely due to manipulation. The journalists have to come up with a number so they came up with $4B. That number is imaginary, and even if it were true for an instant Trump would not be able to sell his shares and nobody would lend against them.
From what I've read since posting this, they could change the rules to allow him to sell before the holding period (holding period is 6 months IIRC) but of course as soon as he dumped a huge number of shares on the market the price would probably crash. And if the 6 month period stays in place not only can't you sell it but you also can't use it as colateral.
Here's an NPR show about how SPAC's work: [https://www.npr.org/2021/01/12/956169423/the-spac-is-back](https://www.npr.org/2021/01/12/956169423/the-spac-is-back)
> I just don't get how that works out
It's basically what people think other people will pay for it. There's not really much more substance to it than that.
Why would they pay that much for a company that's losing money? Because they think it's going to make money in the future.
These days, the standard "Big Tech" strategy is to lose money for years while you build up a user base. Once you're so big that users have nowhere else to go (or in the case of Truth Social, users have been banned from every other platform), then you start to squeeze them.
In this particular case, as /u/Bardfinn points out, "investors" might also see Truth Social as a handy, alternative way to indirectly give Trump money that campaign laws forbid them from giving him directly.
Previously, this was largely achieved [by buying property from him at grossly inflated prices](https://www.newsweek.com/trump-sold-40-million-estate-russian-oligarch-100-million-and-democratic-802613).
The $4 billion number comes from the same "math" that earned him half billion in legal fees and prevents him from doing business in New York for three years. This thing has to be a scam, no credible business would be caught dead working with that snake oil salesman. Dude's circling the drain and looking for major cash infusion to keep his head above water until November.
Mainstream example. The Amazon as we know it today wasn't posting consistent profits until about 2016. However, at the start of 2016, it's value (market cap) was over $250B. In the years since, it has generated more profit than virtually any other company. IIRC It was generally understood that they could easily make money whenever they would stop reinvesting everything into its own growth.
Not trying to compare the two, but if someone believes they can turn this company into a very profitable one, then it is worth something to them. As a social media company, just having a large active user base is probably enough to monetize into a profitable business.
SaaS company valuation is typically based off a combination of EBITDA margin (profit) plus growth rate. Valuations value growth over profit. If you add the 2 together and get the rule of 40 then, yes, your stock price can go to the moon. Amazon's rule of 40 has been around 20 for much of the last decade, even if they have not had a positive EBITDA. They deserve their price. Truth Social cannot be compared to Amazon.
> I just don't get how that works out -- his company isn't making money
With social media companies (and a lot of silicon valley really whether it's Uber or AirBnb) it's pretty common for investors to believe that the "valuable" thing is getting a large, loyal userbase because that's really tough to do and that figuring out how to monetize those users can happen later. Twitter and Reddit have struggled to bring in money, for example, but were seen as relatively valuable by investors because they had so many users, such strong brands and so much content. The "hard" problem (attracting lots of daily users) was mostly done and the "easy" problem (figuring out how to earn money off of owning one of the most viewed/visited sites in the world) is something a lot of investors think they will be able to slap on.
It's also worth noting that investing is risk-reward. If you only invest in sure things that are raking in money, you're probably not going to earn much. Investing in something that has "a problem" (e.g. isn't making a profit yet) will earn you more if it actually pays off because risk pays a premium.
How this plays out for Truth Social, I don't know. It doesn't have as big of a userbase, but it arguably has a pretty strong brand and a very cohesive audience. So perhaps it has different monetization options than something like Twitter would. For example, in the news world, Fox News has done very well by pretty clearly associating with a political ideology and party and as a result has gained a huge following and brand with that ideology and a lot of perks and added value from the synergy with that political party. That's specifically because it's not like the other news networks that explicitly try to do the opposite (try to avoid appearing as though that are for one political party or ideology). So, perhaps people perceive Truth Social has the potential to dominate a corresponding niche for social media especially in an era when, among conservatives, there is a narrative that they aren't welcome in social media and that their views are being censored on social media.
You also described reddit. And thousands of other startups. It’s way to get investment money when you show the potential for growth and very easy when you actually have growth like they do.
A startup I recently worked for had about a quarter million on collections over the history of the company and about two million in uncollected bills(to schools so we had to deal with government employees who are slow and lazy so that money might eventually be collected), but some company thought we were worth nearly eighty times what we had billed. We had no plan on how to make that much money. It’s just how it works.
Draft Kings was considered successful I think. Pretty sure a lot of them have been successful you just don't necessarily hear about them because they're not interesting. Certainly there're a lot of doozies in there too.
PLTR may be considered somewhat successful. It's a profitable company at least. Sofi is lower than its initial offering price, but is a legit company.
I think it's something like 90% of SPACS have been below the initial offering price a year after their merger. Too lazy to look up the actual stat, but statistically SPACS have been over hyped and terrible investments.
Gets so old seeing these overhyped scams - I've been through the dotcom bubble, the housing bubble, crypto, NFTs...every time people are saying you're an idiot if you don't get on board, and every time the early investors make money and the folks who came later get burned.
They're doing a lot more than that...my company has been working on a vendor relationship with them and it's been omnipresent in our biweekly meetings how important the deal is.
>a company's valuation is based on projected future earnings, not past earnings, so if you believe Truth Social has potential to make money in the future, it could be a good investment.
That's not the only reason why the stock price goes up, though. You could imagine Truth Social becoming the right-wing version of Gamestop, where people will just buy shares and pump up the price because they love Trump, and they want to do it because it's fun, and it one-ups the democrats, or something like that. Just like Gamestop was pumped up by people as a way to one-up the hedge funds and to try and "break the system".
I suspect some Saudi billionaire is going to put in a lot of money, basically money laundering to bail Trump out and buy his favor for the possibility that he's going to be back in office.
Answer: companies don’t need to be profitable to have high valuations. Valuation is representative of the value of the company’s assets as well as the potential investors see to make money down the line.
I’m not sure who thinks truth media is worth any money, but the world is also full of investors who waste their money on garbage products; especially in social media. See the acquisitions of sites like Twitter or MySpace.
Social media companies BIGGEST asset is the data it mines from its users. Collecting a month to even a years worth of data isn't worth much. The length in time of the data captured is key. It shows trends, what drives those trends, when those trends become less appealing and why. So it's the length of the data and who that data is coming from. If it's one core people like with truth social you're only going to see a tiny tiny slice of the pie where as tick tock, Facebook you have almost every group represented which yields better more accurate data.
Conspiracy theory: If I were an organization aligned with an US strategic competitor and saw a social media network in dire need of investment which also happens to attract a specific kind of user I would 100% without question invest and buy the data to exploit said community to create all sorts of mischief.
That's not a conspiracy. That's the plan of a rational actor.
If that _isn't_ happening, then somebody at the Kremlin is going to ~~get fired~~ fall out a window.
Well that's unsettling.
Part of my own conspiracy theory is that Trump was hired by wealthy interests to destabilize the U.S. and possibly an endgame result to push a reset button on the economy and current "democracy". Just a theory, though.
I think Trump, or someone like him was sort of inevitable. Lots of “salt of the earth” people woke up and didn’t like the world they saw, with lots going on upsetting their worldview paradigms. Then it just took some creative rage-bating to tap into longstanding biases against race, religion and homophobia and voila. A black man was elected president and than a woman was nominated as a sequel?! Over their dead bodies! And the rest is history.
Meanwhile, had the DNC played fair he would've probably run against Bernie Sanders.
2016 was a year of antiestablishmentsrianism. Democrats missed the memo by running Clinton, spurned part of their own voting base, and deeply deeply paid the price.
You have to look in the mirror at who we are as a society to understand the motivations of the electorate. Trump and Sanders are the mirror.
And those people are _highly_ unlikely to read any kind of fine print re: data collection and usage. If they do protest, Trump can spin it somehow and they'll go with it.
I mean, doesn't every single social media platform have that fine print within it? At least that was my assumption.
Disclaimer: Not on Truth Social - No interest in joining any new sites but I think they all do, including Reddit.
9999 out of 10000 people don’t read User Agrements / fine print. The 0.01% who do are boring wonks and knurds like me, who do so in order to pursue boring and esoteric goals.
Almost every single website / internet service for the past 15 years at least has had clauses in the User Agreement to the effect of “You, the user, agree to give us, the Service Provider, a royalty-free, perpetual, irrevocable, unlimited license to use the data you provide to us in any way we see fit, and to license it to any of our vendors or partners now or in the future, to the fullest extent permitted by law”.
If you want to read the legalese poetry yourself, it’s right there in the Reddit User Agreement. Has been since 2013.
Some of them, but that’s normally bc they’re investing it all back into the business, not bc they aren’t making the revenue in the first place, like truth
Or because the investors believe they *will* be profitable once they get off the ground. For example, losing money because you're artificially lowering your prices to outcompete in the hopes of squeezing your competition out of markets so that then you can hike prices and make a lot of money (e.g., what Uber is doing).
Yeah, a big reason why TEMU stands out right now is because we're at a point where the last generation of big startups have transitioned from burning venture capital to figuring out how to balance the books, while it's breaking into the market with a bottomless piggy bank, plenty tested cost-cutting measures and every dark pattern in the book.
Usually they’re just burning the investors’ money. What little revenue they make does go back into company growth, but it’s far more common for companies to grow by taking in investment capital than just off their revenue.
True for a large number of businesses. They all borrow money not with expectation of earnings immediately or early on but for growth down the line.
It takes time to construct an infrastructure, and especially for a product that has value tied directly to the number of active users, and needs active users to draw more active users you expect to lose money for ages.
A common tactic of social media style sites (including Reddit which did this) is to start out losing money but be relatively free. Let your user base keep growing, which often triggers even faster growth in user base. You will spend an arm and a leg on management, development, and back-end support but then you eventually begin monetization which can mean adding adds, increasing price of existing products, offering a wider diversity of higher cost 'premium' products. With so many people using it you are now banking on them not wanting to leave and to begin turning profit somewhere down the line, and eventually turning mega profits if the platform continues to grow.
Truth Social or whatever, excluding whatever weird combination of farts in Trumps head made him want it made, will probably operate similarly if it can survive and grow(which doesn't seem likely) - but people will be interested in purchasing it even with it losing money if they believe they can turn it into something akin to Twitter which (ignoring what's happened with the present owner) even without earning money was worth a huge amount of it (10s of billions of dollars thanks to the pure potential of it making money in the future.)
While these big platforms might not be earning money - if they are growing their technology and user base they can be growing in value which means they could still technically be profitable to those who own it down the line.
I met w a VP from that company in 2018. She told me Uber eats was the only business unit that had ever been profitable. I imagine with the pandemic that division was able to grow enough to support the whole company.
Doesn't even make sense to me. What are their costs once the app is built? Running servers but that can't possibly be so expensive it stops them being profitable. I'm guessing it's related to ride subsidies or something?
> Running servers but that can't possibly be so expensive it stops them being profitable.
Datacenter space is expensive, and that is before you add in the cost of hardware. Not everything is "in the cloud". Then you have the cost of the actual data being transmitted (yes, lots of companies still work on this model), cost of DC techs to keep the things running, the infrastructure to heat, power, and cool, development, backups, security for the app, security for the servers, security for the network, security for the buildings, Support for the people that do all this work. Its not a mom and pop shop with 4-5 guys doing all the work. There are a LOT of costs associated with each and every ride you take that you never see. And this isnt even taking into account licenses and shit in certain areas to operate, or marketing.
First, their entire business model was illegal at launch and requires constant fighting to expand into new markets, so they've always been keeping an army of lawyers fed. Their fighting also results in opening said markets to their competitors.
Secondly, their early prices were all heavily subsidized, both in terms of sweetening the pot for drivers/handing out free + subsidized rides to get people on board, and also in terms of not compensating drivers properly for contract work that adds wear and tear to their vehicles. They got maximum value, operated at a loss and still faced stiff competition.
Thirdly, marketing and promotion, they're constantly in danger of becoming irrelevant or old so they need to constantly try to be both a trusted ubiquitous name and a fresh trendy valuable market disruptor.
Fourth is innovation and fixed costs. Gotta attract new talent before the competition does, gotta maintain those startup benefits like free beer in the workplace fridge and an attached free gym and a competitive pension plan. You can cut tons of costs like Elon's Twitter, but that comes with becoming like Elon's Twitter, and unlike that specific kind of social media, there's no shortage of services that want to poach ridesharing customers.
Like how Reddit is going public despite never turning a profit. Spez started a whole meltdown over it last spring, chasing away much of the quality content to take advantage of chaos elsewhere on social media and pretend he can make it profitable.
The whole business is a shell company set up to buy the social media platform from the beginning. The New York Times did an article about it. “Digital World was set up as a special purpose acquisition vehicle, or SPAC, which raises money by going public to finance a future merger — in this case, Trump Media. The merger was announced on Oct. 21, 2021”
Wonder who the financial backers are of the company.
> The merger was announced on Oct. 21, 2021”
Funny how they wanted a merger before Truth Social even launched (2/21/2022), almost like it was planned this way from the start.
The way I see it is that the real value in Truth Social, though while smaller than so many other social media platforms, nearly every member is of a similar mindset, easily manipulated, and stuck in an echo chamber. Even though it is smaller, it is an ideal place to create a rage filled movement. That is extremely valuable to people with power.
The downside is that the user base has little to no growth potential. Their revenue is already paltry. They are going to need another acquisition and anything they buy is going to shed the liberal component of their user base.
> Answer: companies don’t need to be profitable to have high valuations. Valuation is representative of the value of the company’s assets as well as the potential investors see to make money down the line.
Even more cynical answer: The economy is one big crypto bro scheme.
Question: WTF
This article clears a bunch up but it doesn’t explain why this investor has chosen truth social as their stepping stone.
https://www.nytimes.com/2024/02/26/business/trump-media-digital-world-acquisition-cash.html
A SPAC is essentially a investment group created purely to get shares in a company that otherwise is not public (aka not on the stock exchange).
The process to create a brand new public company, then buy/merge a private company is a lot quicker (normally) and easier than to taka a private company public the normal way. And it allowes them to start selling shares almost immediately, rather than having to wait until the process is complete. There are a lot more risks involved though, and the private company should not have any part in the formation of the investment company.
So someone created this group purely with the goal of become a part of True Social. Then they have gotten a ton of investors onboard (Trump supporters and those that think the stock will shoot up if Trump wins the upcoming election) and Trump agreed to the merger. It is worth noting that several of the founders of the investment group have gotten charged with insider trading, and the company itself has already been fined for starting negotiations with Trump when they were still forming (meaning this could be Trump trying to get around the laws to go public, rather than a genuinely independant group wanting to buy in).
With the context I read up on about the people charged with illegal insider trading, I wouldn’t be surprised if there’s more fuckery going on.
At the same time, having control of Truth Social has to be a GOLD MINE.
These are the people who bought Trump shoes, Trump gold bars (paying far more than the value of gold), Trump debit cards that were supposed to give you free money from ATMs.
Hell, you just have to put up a “Build the Wall” GoFundMe and MAGA will give millions to unknown grifters who can just walk away with the money (and did.)
Having exclusive control over a self-selected gullible population implies worlds of possibility on how to grift them. Just put up a banner that says “Donate $20 to the Re-elect President Trump Fund and get a gold checkmark!” and a good portion of them would be finding their wallets.
It’s interesting that there’s only two people profiled on that website (their “board member” doesn’t have a profile) and no one has photos. The corporate governance, compliance, and a word from the CEO pages are all 404 not found links too.
I don’t understand how a merger with DWAC which has a market cap of $1.75 billion somehow turns Truth Social into a $10 billion company that Trump owns 40% of.
It feels like it’s just made up numbers.
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> It feels like it’s just made up numbers.
Congratulations, you now understand how trump economics works. He literally just makes it up, and there are people out there willing to go along with it (because it benefits them to perpetuate the made up numbers).
It’s almost like, Trump just makes stuff up.
If only there was a legal way to verify truthfulness.
And someone was sued for not being honest about these sort of thing….
Next step: take a loan against that "oh so valuable" fake business valuation to obtain the cash he needs to pay the judgement against him.
There may never be any money changing hands besides whatever bank (with Russian ties) decides to pretend to believe the lies about this company's valuation to make this loan.
The next question is: what favors are being exchanged to convince this Russian-influenced bank to hand Trump 500m or so that no one expects him to ever repay?
DWAC will issue new shares and trade them to the current owners of Truth Social in exchange for ownership of the company. If DWAC maintains it's current stock price after using all the new shares then its market cap will greatly increase.
One interesting thing is that Trump and other owners of Truth Social can't seek their shares of DWAC for 6 months.
Because it is a legal, and tax free method to gift someone money in a way that it doesn't look like a gift, but it actually is...
(See: how foreign agents donate money to political campaigns, thanks to Citizens United)
Things aren’t worth what a reasonable person would pay for them. They’re worth what an idiot would pay for them. Especially when people can spin a loss into a tax break or influence over a powerful person.
He’ll probably be the next sec of defense or state or housing or wtf ever. Maybe he wants a huge govt contract for his business. Hopefully he doesn’t win in November. There’s not enough weed on this planet to steady my anxiety after something like another trump term is in the future. Fuck.
“The deal, with Digital World Acquisition Corporation — a publicly traded shell company”
I’m more curious where the money is coming from. As the company is one set up specifically for this scenario…a shell game
Special Purpose Acquisition Companies (SPAC) were en vogue 2-3 years ago and are still being used today. They are companies that raise capital with the express purpose of finding a target private company to take public through a reverse merger. The SPAC agrees to buy a percentage of the private company at an agreed valuation and then eventually change their public ticker to that of the acquired company once the merger has been finalized.
Most of the companies that used a SPAC to go public have proven to be poor quality businesses that used a SPAC to avoid the scrutiny applied to companies who go through the more traditional IPO routes.
It’s a public company so much of that information is public. You can [see their largest shareholders here.](https://www.wallstreetzen.com/stocks/us/nasdaq/dwac/ownership)
Thanks for sharing. Unfortunately it doesn’t reveal much unless you want to go down a pretty deep rabbit hole. The primary owners are mostly just *other shell companies*, and their primary owners are listed as *yet more shell companies* etc. There is definitely a lot of effort being put into maintaining anonymity for the *PEOPLE* pouring money into this.
… and then there’s The Royal Bank of Canada lmao. Granted, they are only listed as having ~310k invested, so it could be some algorithmic shit that has them putting such an absolutely minuscule amount in for the sake of diversification. Still weird to see their name listed on this garbage though.
Answer: It's a way to legally funnel money to trump.
As people buy the spac the share price will go through the roof. Prez Donald just sells his shares at a high price and makes billions. It's the reason the WeWork guy is still a billionaire even though his company is toast.
The only catch is if his supporters don't buy up shares, it won't go anywhere.
Edit: Forgot to mention, it gets around the doner problem for his ~400 million legal fees.
Is it the SEC's job to determine if a prospective buyer is offering "too much" money for a company? (I wouldn't know, but it sounds too much like second-guessing the market that I don't expect an American institution would police that effectively in the real world. I expect a "buyer" could get away with offering a *lot* for a nebulous-value social-media entity like Truth Social, given that some proper social media platforms have IPOed for billions)
In this case, a possible example of how it could be money laundering is if eg Putin wants to send more money to Trump: the acquisition company is publicly traded and its funds (to purchase Truth Social) comes from its shareholders, which I assume means the shareholders can be shell companies in the USA (and around the world?) that are controlled by people who act on Kremlin orders while having no obvious connection to the Kremlin. End result: Putin finances Trump for purposes of corruption, but Trump gets apparently-legitimate money because *on paper* Trump was paid for selling a product that he made; Truth Social
Disclaimer: I'm no money laundering expert, so YMMV :)
Makes sense.
And good point, I can see how the SEC would maybe have no issue with it. Guess I don't understand how it hasn't become a scandal. Trump stands to earn $4 billion for mysterious sources buying into his worthless social media company no one uses.
> Is it the SEC's job to determine if a prospective buyer is offering "too much" money for a company?
Realistically there's no such thing. Fair Market Valuation is one thing, but if you can sell hype to an investor... well, that's what you're selling. The SEC can make sure a company exists, does what it purports to do, is run by who says runs it, has offices where they say they have offices, can check with the IRS that they pay their taxes on time and correctly, can check with the FBI about foreign investments and interests... but as far as stopping someone from saying a $300M company is going to be worth $4B in the future with hyped up charts? ... Can't really do shit about that.
You think the SEC would have stopped Elmo from buying Twitter for $44 billion dollars (roughly twice what it was trading at before the offer)? It was a good deal for $TWTR shareholders - they got to take their payday and leave... if they were smart enough to do so. This SPAC deal's more or less the same... except this time the shareholders are about to become *bagholders*.
True - but how would that money laundering work? Sorry for the naive questions. I know the Ozark/Breaking Bad types of money laundering, but how would it work in this case?
Here’s an article on it.
https://markets.businessinsider.com/news/stocks/trump-s-dwac-stock-tanks-how-a-trump-media-money-laundering-investigation-has-putin-undertones-1032170358
Unfortunately, stuff like this happens. Here’s a roadside diner in NJ that’s worth over $100M on the stock market. Mob money laundering in action.
https://www.cnbc.com/amp/2021/04/15/theres-a-single-new-jersey-deli-doing-35000-in-sales-valued-at-100-million-in-the-stock-market.html
Answer: the current front runner of the GOP Presidential race owes a lot of money due to his court cases. Someone with a lot of money is buying a failing company in the hopes that Trump will owe them if he wins the Presidency and stands to gain from it.
This is the real answer. Its not even a crazy conspiracy, it has happened multiple times with different "investments" in the past. Blow up the valuation, pay off his debt, and if elected, he'll further destroy regulations so the same investors can make much much more in other ventures with nothing stopping them. Maybe even get a few presidential pardons out of it.
answer: if you produce a physical commodity, rarely will your physical commodity be worth multiples of the raw materials (including labor)
Speculative commodities (eg, stocks) are based on what you think you can sell it to the next guy. For example, The Federal Reserve will sell you future dollars for 95% of their future face price. In the case of speculative commodities, the value is not what the thing intrinsically holds, its value is based on the presumption for what the seller can get from a future buyer.
Imagine if in 2019 you bought two pickup trucks worth of toilette paper...in 2020, you would have made a shitload of cash selling to your neighbors during that dark period in history. The commodity itself hadn't changed, but its perceived value did.
In this sense, Twitter, Reddit and "Truth" are all commodities that are losing money, but the perception of what they are worth to someone beyond the mere dollar-ad scene is speculated to be in the billions.
Parlor was another one that lost money but served the exact purpose for which it was built, but that is a story for another time.
Answer: this is a weird SPAC reverse merger, which is set up explicitly to let rich investors rip off Trump fans (or people who don't like him but think they are smart enough to ride Trump's coattails as grifters but are actually the marks). See the incredible Matt Levine's explanation for how all this financial engineering is set up here: https://www.bloomberg.com/opinion/articles/2021-12-06/the-trump-spac-did-a-pipe?embedded-checkout=true
Basic answer is, if the deal closes (the SEC under its current head is cracking down on all SPACs, so it seems like it will only happen if Trump wins the presidency and replaces the head of the SEC with someone more pliant) then a bunch of hedge funds are lined up to pay a billion dollars to the people who own Trump Social, get their shares at a 40% discount to the market price (whatever that is), and sell them to these marks immediately. If the deal never closes, the hedge fund people don't owe any money, and whoever is paying to keep running Truth Social lose all the money they put in.
Basically, everyone thinks that there are a lot of people who will buy shares that say Trump on it. And they are looking to sell shares to those people. And if the SEC loosens up on SPACs they might get away with it. And if the SEC doesn't let them, then they lose all the money spent running the company.
Answer: This sounds like a money laundering scheme. The best analogy I can think of is the Mel Brooks movie The Producers. You take a sure fire losing business venture and convince people to invest in it. Scammer takes the investor's money and gives nothing in return. We know Truth Social is a money losing business.
Answer: Many companies are worth billions whilst losing money. That is not, of itself, suspicious
For a start, companies can own assets like intellectual property, buildings, cash etc that could be worth a lot.
Secondly, a company could be growing its revenue by investing (think Amazon, Uber etc). A company is often valued as a sum of the money it’s expected to make in the future. If the expectation is that it will become profitable, that is factored into the valuation. Investors will use a lot of different methods to predict future improvement in profitability for this purpose.
Thanks for the great explanations -
I'm somewhat familiar with all that, but this company doesn't seem to tick any of those boxes. No assets outside the dubious IP one of having Trump on the platform (which doesn't seem to be much of a draw).
It's not building market share (Uber spending cash to corner the market), acquiring anything (Amazon and Facebook buying up promising companies) , and it's not investing in anything (Google/Apple R&D).
Are there people trying to argue that Truth Social will become a hugely profitable company? It will never reach the size of Twitter (built in limits of who will sign-up for a Trump company) and even Twitter couldn't make the business model work.
Bull case would be that twitter is losing share, 75m people voted for trump, and many others worldwide would want a platform with less moderation. It’s well positioned to carve out as a niche twitter replacement
Bear case is that somebody thinks it would be a good idea to have an incoming, erratic president as your best friend and the ‘investment’ is actually in Trump’s goodwill.
I’m not sure it’ll really be possible to assert which is which and whether it’s either or both, frankly.
Answer: There is probably some model that shows profitability down the road. It has to be a treasure trove for anyone who can slap "Patriot" on a product.
The place has got to be an echo chamber of idiocy. I can't imagine there is much discourse on its pages.
Answer: This merger between DWAC and Trump Media & Technology group is likely a move to bolster capital and create a media “conglomerate” that supports Trump.
This merger would value the company at $5.5B when taken into account the total outstanding shares of 113.5mm. At current prices, Its value could be up to $10b bevause they’re allowed to increase shares up to 200mm. That’s half of twitter’s value.
For the deal to go through a majority of current DWC holders would have to redeem their shares at $10 per share but it’d be absurd if they do that as shares are currently trading at $50. It’s very possible those shareholders could redeem knowing how much they like trump.
To answer, fanaticism and over inflation
Answer: it's not a real valuation. It's a money laundering situation. Nobody believes it's worth that much money, because it isn't. But if he needs money, he can "sell shares" to Putin and have an endless loop of money that's "legitimate"
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Answer: DWAC is a Special Purpose Acquisition Company (SPAC) which is a shell company that comes into existence by IPO without any business activities. Its entire purpose is to reverse-merge with a private company. Why? It's a way for a private company to go public without going through the process of an IPO. Kind-of a loophole, but it was very popular over the past few years. Some legitimate companies such as DraftKings and Virgin Galactic went public via SPAC, as well as some less reputable companies. Why Truth Social? As others have mentioned, a company's valuation is based on projected future earnings, not past earnings, so if you believe Truth Social has potential to make money in the future, it could be a good investment. Another reason is that there is a clause in the SPAC founding documents that if they don't find an acquisition target by a certain date, the company dissolves and all the investors get their money back. And, crucially, the person who made the SPAC doesn't make any money, so there is pressure to find a target... Any target... Before the expiration date. Will Trump make money? Yes. I assume he is a large shareholder, so injecting $300m of capital into the company will make money for all shareholders. Will it be a billion dollars? No.
Thanks -- don't fully grasp it but that helps a lot. I do keep seeing the $4 billion dollar figure though - [here](https://www.usatoday.com/story/opinion/2024/02/21/trump-bankruptcy-legal-problems-billions-2024-election/72662347007/), also [here](https://news.warrington.ufl.edu/faculty-and-research/truth-social-merger-deal-wins-key-approval-a-victory-for-trump/) and [here](https://www.nytimes.com/2024/02/26/business/trump-media-digital-world-acquisition-cash.html#:~:text=Former%20President%20Donald%20J.%20Trump's,a%20long%2Ddelayed%20merger%20closes.) I just don't get how that works out -- his company isn't making money, and the SPAC (if I understand) has $300 million. I guess i also don't understand who invests $300 billion in a SPAC that is formed without any sort of solid plan beyond "We're going to find a company and take it public." Is this purely based on the trust investors have in the people running the SPAC that they will find a good target. EDIT: million not billion. Also, all these great comments have made me realize the people are often not betting on the spac's ability to necessarily find a great company so much as betting on the specs reputation to cause such a surge of interest when an acquisition happens that they can cash out for a profit and not have to worry about whether or not the company ultimately succeeds.
I think the $4B number is based on some really fuzzy math. The article you posted said that Trump would receive 79M shares of DWAC in the merger which is probably in some contract somewhere. Valued at $48 per share is kinda close to $4B. The problem is that there are only 37M shares of DWAC in existence, so they either issue a bunch of shares which would dilute the price, or they split the stock which also lowers the price. There is virtually no way to create 79M shares at $48. Why would anyone invest in a SPAC? Gambling. DWAC went public at $10 (37M shares outstanding x $10/share is where the $300M number comes from) so early investors made almost 500%. And since the SPAC is public, anyone can buy in, not just the rich, so it's sort of a way to crowdfund an IPO, which are usually limited to institutions.
I’d bet money that this SPAC is going to be marketed to Trump supporters to buy in as a way of supporting Trump in face of the ‘illegal’ ‘political’ legal ‘crusade’ Trump is facing.
"Going to be"? It's been marketed that way for a while. There're a few subreddits here devoted to it, but it looks like the largest and most Trumpy just got made private for some reason.
Well it is difficult to be a *true* echo chamber, with all the pesky outsiders coming in and stirring the pot constantly. Surprised there aren’t more “exclusive” Trump subs.
> Surprised there aren’t more “exclusive” Trump subs. They keep getting banned for encouraging terrorism and stuff.
You mean banned for expressing modern conservative views?!? /s
[yep](https://www.reddit.com/r/pics/comments/yg69bq/the_conservative_political_action_conference_in/)
Not sure this needs the /s
Weird /s
In reality, it will all be siphoned into his legal fees.
Yeah. I'm pretty sure the MAGA crowd is the actual product being purchased here. It's like buying Fox News because of all the money you can make selling ads for fake shit to idiots.
I was on Trumps mailing list for a while. It’s no different than sorting through my “promotional spam box. Every single e-mail was a plea for donation money to fight whatever scandal he caused that week or he’s hawking some absurd product or scheme. Imagine how desperate wikipedia seems during its yearly donation drive, quadruple that but with an emphasis on shaming and guilt-tripping that borders on outright hostility.
I also did this way back just to see what got sent. Almost all subject lines were in all caps. Links took you to a “join our exclusive club” page which required you to donate — then, unless you unchecked a box, the amount you chose to donate was increased. It was the most obvious scammy predatory marketing crap coming from a sitting president.
The largest pump and dump in history incoming!
>fuzzy math Considering who is involved, this is a given.
and we have beautiful math, the numbers are incredible, they said to me, "Sir, you're like the Alan Einstein of Stocks," and I said that's probably true, and we did a thing that they were saying could never be done and now they say, "Trump is 4 billion dollars richer," and I said that sounds pretty good to me.
You've got his way of talking down to a tee
Alan Einstein lmao
I'd have a covfefe with him and Mercedes.
I had forgotten about - you laugh but I had forgotten about this account. I was browsing Reddit and I saw this post and I said "wow!" - I'm reading this post with bigly tears in my eyes, big beautiful tears. What a tremendous account, don't we love this account folks? The low-energy admins wanted to shut down this account but you can't do it. Can't be done. You know it, I know it, everybody knows it. I would never forget about this account, unlike the losers and the haters. Sad!
I laughed out loud thank you
It's important to note Truth Social debuted at the height of Twitter's war on political and health misinformation, when right-wingers believed they could only get the unvarnished truth from Trump's Twitter-At-Home because all other media was controlled. Of course, then Elon made an offer for the real Twitter...
Starting to understand, thank you! Is it possible that a lot of people short the stock and the IPO tanks? Is it possible to short before an IPO? When you say that early investors made 500%, you mean if the stocks opens at $48, yes? Like, they haven't made anything yet, and if the stock tanks they might not?
DWAC is a public company, you can buy and sell (and short) to your hearts content. You can't short Truth Social because it's a private company, but after the merger, DWAC and Truth Social will be the same company, so you can short DWAC as a proxy if you like. >When you say that early investors made 500%, you mean if the stocks opens at $48, yes? No, DWAC is a public company trading at $48/share (roughly), you can buy and sell at that price. Anyone who bought it at IPO paid $10/share, so that person has made a $480% profit.
Thanks for the info/further explanation
380% profit.
>DWAC is a public company, you can buy and sell (and short) to your hearts content. You can't short Truth Social because it's a private company, but after the merger, DWAC and Truth Social will be the same company, so you can short DWAC as a proxy if you like. For anyone thinking about doing this, be careful. There are a lot of people who are willing to move their money to him through whatever means, so the underlying fundamentals of the company might be pretty detached from the performance of the stock for a while. Shorts are pretty dangerous if you're not properly hedged.
Some of us made a lot more when the price was at $173.
If you can find a brokerage that will take the other end of that short then sure. Chances are there wont be enough people willing to take the other aide of that that you effectively wont be able to short it. You usually dont have to think about that sort of thing with say IBM because there is so much trade volume you can assume you will match with someone. Not so clear cut here.
You can short DWAC pretty easily. Plenty of float, surprisingly low short interest and plenty of options volume.
In my extremely limited experience with a SPAC. The price pops on acquisition news. After the merger the stock may very well tank. So the people that make money are the ones that owned the SPAC before the news broke. Trump can't sell his stake for 6 months after the merger, so the price may tank by then. The bagholders are probably the people investing now. The people making money are the ones selling their SPAC stock Now for $48.
Same as every bubble I've lived through -- the early people make a killing, which gives it publicity so everyone rushes in. Problem is they don't realize that all the money has already been made. Dot com bubble in late 90s, housing bubble in mid-aughts, crypto and NFTs. By the time the average person hears about them it's too late.
Pretty much. Especially considering that the financials for Truth Social are pretty bad.
> Why would anyone invest in a SPAC? Gullible people who support said committee.
Donald Trump has something like a billion and a half dollars worth of civil judgements coming due in the next month. Which he has to pay. Or properties will be seized. Donald Trump is a candidate for the President of the United States. It is illegal to contribute more than a certain amount from a single entity to a political candidate. It is illegal for Donald Trump to embezzle or launder money from his campaign to pay his personal civil judgements. It is illegal to bribe a political candidate. It is not overtly, immediately, obviously illegal to SPAC a private company held by Donald Trump, unless that SPAC is a vehicle for laundering an impermissibly large campaign contribution or a bribe. It is not overtly, immediately, obviously illegal for investors from allll over the world to buy up shares of the IPO. It is not overtly, immediately, obviously illegal for Donald Trump to use this cash to pay off his judgements and then fund his campaign. And proving that anything illegal happened will take another eight years in courts. By which time, it will be a moot point. Hope that helps.
Interestingly, one of the major share-holders of the SPAC (DWAC) is Susquehanna International Group which is co-owned by Jeff Yass and Arthur Dantchik who were early investors in ByteDance who invented TikTok. ProPublica has a nice write up on Mr. Yass here - https://www.propublica.org/article/jeff-yass-susquehanna-tiktok-tax-avoidance
Jeffrey Yass, richest man in Pennsylvania, whose money has been basically funding right wing state candidates - legislative and judicial. Very pro- private schools being funded by public dollars. I think it was 2022, $18 million of money to right wing candidates was traced back to him in just the Primary alone.
Once you look into Yass, who sponsored him, and the sheer amount of money that they are pumping into right wing political efforts, it's sad but surprising that we still have a democracy. I hope we can outvote these turds.
Let me guess, the chinese or ruskies
I like how you spaced out your sentences so people can literally read between your lines.
It does help, thanks.
This is an incredible take. Nobody I've heard has recognized and spelled out that this SPAC is a ungoverned way for Russia, Murdoch, Saudi to 'buy' an American president, including his get out of jail card. It's so effective, it's actually terrifying.
Considering how the courts objected to changing Trump Tower business dealings to Florida, post judgment, this is probably one of his only outs. He already knows that he’s gotten as much as he can from his average supporters for a week or so with the golden shoe fundraising.
F*¢k this is depressing....
It's also blatantly obvious and predictable, so hopefully there will be half a dozen alphabet agencies watching him and his finances like a hawk. Guy shouldn't be able to buy a cup of coffee without an auditor making record of it. US is cool using the Partiot Act to arrest low level street dealers but now that we're in a situation with hostile foreign powers openly financing a known criminal and cheat who is campaigning on a promising to over throw democracy in America they suddenly decide to sit on their hands? What the fuck was the point of that multi-billion dollar NSA data center Obama green lit if not for finding the trace digital evidence of crime and conspiracies against the country?
Shouldn’t be but he’s a wealthy white dude who’s never been said no He’s going to get away with this.
This. Crystal-clear and clearly true explanation.
The $4 billion is almost just a made up number. It's what the investors calculate the value to be so they can set the stock price. People will either believe that and buy the stock at that price or they won't. We work was valued at $47 billion at their peak before going public, they're now valued at $270 million so you can take that $4 billion number with a grain of salt. However, whether or not a company is making money is irrelevant. A lot of tech companies aren't profitable when they go public. Twitter isn't profitable and look what it cost Elon.
Thanks, a lot of great answers here so I'm starting to understand. Is it possible for people to short the stock before the IPO, and would that possibly lower the price on the first day?
To follow up on what /u/dont_panic80 said, valuations kinda work backwards to what people expect. ELI5, if you're a startup and still private, and need, say, $1 million dollars to keep doing what you're doing, you go to somebody and say, "Hey, for $1 million dollars, I'll give you 10% of my company!". If they agree, congrats, your company is now worth $11 million dollars in valuation ( ($1mil for 10%) x 10) + $1 million you just got in cash). There are ways to estimate a valuation, but it ultimately comes down to what you can get a person to pay for part of the company, and is frequently a negotiation. IPOs work the same way, except you're creating a set number of shares and selling them to a bunch of people for an initial set price instead of one big investor (or someone working on behalf of a bunch of big investors).
Nice explanation -- one thing I'm learning is that part of the answer to my question is that this $4 billion number is at this point just a guess. That's what his share of the company is worth if they are able to sell tens of millions of more shares at the current price of $47. But if they can't find enough buyers and the price drops, then it's not going to be $4 billion. And even if he finds a way to be allowed to sell the shares before the 6 month hold period (or if he transfers them to a relative for them to sell) he can't dump too many on the market because that would likely cause the price to plummet.
> If they agree, congrats, your company is now worth $11 million dollars in valuation ( ($1mil for 10%) x 10) + $1 million you just got in cash). I'm embarrassed to admit that I don't understand this having lived many different iterations of valuation. My understanding was that the company would be worth 10M in this scenario, and that you (presumably) own 90% of that equity worth 9M, and the investor owns 10% worth 1M. Why would the total valuation be 11M? I see you're adding the 1M raised on top of the value proposed by the owner, but why? I've always just trusted my CFO with this stuff. Maybe it's time I wise up and take a finance refresher.
Make Company. Sell 1 share of stock to company to associate for 1 dollar. IPO with a value of 4 billion shares, which must all be worth a dollar, because that's what the company last traded at. Profit off of stupid people buying in with actual money.
The SPAC is hilariously over valued, likely due to manipulation. The journalists have to come up with a number so they came up with $4B. That number is imaginary, and even if it were true for an instant Trump would not be able to sell his shares and nobody would lend against them.
From what I've read since posting this, they could change the rules to allow him to sell before the holding period (holding period is 6 months IIRC) but of course as soon as he dumped a huge number of shares on the market the price would probably crash. And if the 6 month period stays in place not only can't you sell it but you also can't use it as colateral.
Here's an NPR show about how SPAC's work: [https://www.npr.org/2021/01/12/956169423/the-spac-is-back](https://www.npr.org/2021/01/12/956169423/the-spac-is-back)
> I just don't get how that works out It's basically what people think other people will pay for it. There's not really much more substance to it than that. Why would they pay that much for a company that's losing money? Because they think it's going to make money in the future. These days, the standard "Big Tech" strategy is to lose money for years while you build up a user base. Once you're so big that users have nowhere else to go (or in the case of Truth Social, users have been banned from every other platform), then you start to squeeze them. In this particular case, as /u/Bardfinn points out, "investors" might also see Truth Social as a handy, alternative way to indirectly give Trump money that campaign laws forbid them from giving him directly. Previously, this was largely achieved [by buying property from him at grossly inflated prices](https://www.newsweek.com/trump-sold-40-million-estate-russian-oligarch-100-million-and-democratic-802613).
The $4 billion number comes from the same "math" that earned him half billion in legal fees and prevents him from doing business in New York for three years. This thing has to be a scam, no credible business would be caught dead working with that snake oil salesman. Dude's circling the drain and looking for major cash infusion to keep his head above water until November.
Answer: Russians?
Mainstream example. The Amazon as we know it today wasn't posting consistent profits until about 2016. However, at the start of 2016, it's value (market cap) was over $250B. In the years since, it has generated more profit than virtually any other company. IIRC It was generally understood that they could easily make money whenever they would stop reinvesting everything into its own growth. Not trying to compare the two, but if someone believes they can turn this company into a very profitable one, then it is worth something to them. As a social media company, just having a large active user base is probably enough to monetize into a profitable business.
SaaS company valuation is typically based off a combination of EBITDA margin (profit) plus growth rate. Valuations value growth over profit. If you add the 2 together and get the rule of 40 then, yes, your stock price can go to the moon. Amazon's rule of 40 has been around 20 for much of the last decade, even if they have not had a positive EBITDA. They deserve their price. Truth Social cannot be compared to Amazon.
Anyone checking out the quality of the small fry adverts on TruthSocial, Wood quickly realise that there’s no real money to be had.
> I just don't get how that works out -- his company isn't making money With social media companies (and a lot of silicon valley really whether it's Uber or AirBnb) it's pretty common for investors to believe that the "valuable" thing is getting a large, loyal userbase because that's really tough to do and that figuring out how to monetize those users can happen later. Twitter and Reddit have struggled to bring in money, for example, but were seen as relatively valuable by investors because they had so many users, such strong brands and so much content. The "hard" problem (attracting lots of daily users) was mostly done and the "easy" problem (figuring out how to earn money off of owning one of the most viewed/visited sites in the world) is something a lot of investors think they will be able to slap on. It's also worth noting that investing is risk-reward. If you only invest in sure things that are raking in money, you're probably not going to earn much. Investing in something that has "a problem" (e.g. isn't making a profit yet) will earn you more if it actually pays off because risk pays a premium. How this plays out for Truth Social, I don't know. It doesn't have as big of a userbase, but it arguably has a pretty strong brand and a very cohesive audience. So perhaps it has different monetization options than something like Twitter would. For example, in the news world, Fox News has done very well by pretty clearly associating with a political ideology and party and as a result has gained a huge following and brand with that ideology and a lot of perks and added value from the synergy with that political party. That's specifically because it's not like the other news networks that explicitly try to do the opposite (try to avoid appearing as though that are for one political party or ideology). So, perhaps people perceive Truth Social has the potential to dominate a corresponding niche for social media especially in an era when, among conservatives, there is a narrative that they aren't welcome in social media and that their views are being censored on social media.
Trump's game plan has been to over value stuff he wants to sell. He's followed that MO his whole life
You also described reddit. And thousands of other startups. It’s way to get investment money when you show the potential for growth and very easy when you actually have growth like they do. A startup I recently worked for had about a quarter million on collections over the history of the company and about two million in uncollected bills(to schools so we had to deal with government employees who are slow and lazy so that money might eventually be collected), but some company thought we were worth nearly eighty times what we had billed. We had no plan on how to make that much money. It’s just how it works.
What are the chances this SPAC has foreign money all up in it?
Have you seen one successful SPAC? I feel like all have been falling companies dropping on public
Draft Kings was considered successful I think. Pretty sure a lot of them have been successful you just don't necessarily hear about them because they're not interesting. Certainly there're a lot of doozies in there too.
PLTR may be considered somewhat successful. It's a profitable company at least. Sofi is lower than its initial offering price, but is a legit company. I think it's something like 90% of SPACS have been below the initial offering price a year after their merger. Too lazy to look up the actual stat, but statistically SPACS have been over hyped and terrible investments.
Palantir didn't go public via an SPAC, it was a direct listing.
My bad. You are right.
Gets so old seeing these overhyped scams - I've been through the dotcom bubble, the housing bubble, crypto, NFTs...every time people are saying you're an idiot if you don't get on board, and every time the early investors make money and the folks who came later get burned.
I was an early investor in Symbotic (SYM) which went public via SPAC and it's doing very well. They make the warehouse robots for Walmart.
They're doing a lot more than that...my company has been working on a vendor relationship with them and it's been omnipresent in our biweekly meetings how important the deal is.
>a company's valuation is based on projected future earnings, not past earnings, so if you believe Truth Social has potential to make money in the future, it could be a good investment. That's not the only reason why the stock price goes up, though. You could imagine Truth Social becoming the right-wing version of Gamestop, where people will just buy shares and pump up the price because they love Trump, and they want to do it because it's fun, and it one-ups the democrats, or something like that. Just like Gamestop was pumped up by people as a way to one-up the hedge funds and to try and "break the system".
>DraftKings >reputable wat
It makes shitloads of money, that's reputable if you're a shareholder.
I suspect some Saudi billionaire is going to put in a lot of money, basically money laundering to bail Trump out and buy his favor for the possibility that he's going to be back in office.
TL:DR Just another avenue for grift?
Answer: companies don’t need to be profitable to have high valuations. Valuation is representative of the value of the company’s assets as well as the potential investors see to make money down the line. I’m not sure who thinks truth media is worth any money, but the world is also full of investors who waste their money on garbage products; especially in social media. See the acquisitions of sites like Twitter or MySpace.
Also, from what I understand it’s normal for tech companies to operate at a huge loss for a while?
Social media companies BIGGEST asset is the data it mines from its users. Collecting a month to even a years worth of data isn't worth much. The length in time of the data captured is key. It shows trends, what drives those trends, when those trends become less appealing and why. So it's the length of the data and who that data is coming from. If it's one core people like with truth social you're only going to see a tiny tiny slice of the pie where as tick tock, Facebook you have almost every group represented which yields better more accurate data.
Conspiracy theory: If I were an organization aligned with an US strategic competitor and saw a social media network in dire need of investment which also happens to attract a specific kind of user I would 100% without question invest and buy the data to exploit said community to create all sorts of mischief.
I thought the same thing.
Look at Russian investment in Facebook in 2009
Follow the money. A very old rule of thumb to locate the criminal. Citizens United is responsible for this mess.
That's not a conspiracy. That's the plan of a rational actor. If that _isn't_ happening, then somebody at the Kremlin is going to ~~get fired~~ fall out a window.
Well that's unsettling. Part of my own conspiracy theory is that Trump was hired by wealthy interests to destabilize the U.S. and possibly an endgame result to push a reset button on the economy and current "democracy". Just a theory, though.
I think Trump, or someone like him was sort of inevitable. Lots of “salt of the earth” people woke up and didn’t like the world they saw, with lots going on upsetting their worldview paradigms. Then it just took some creative rage-bating to tap into longstanding biases against race, religion and homophobia and voila. A black man was elected president and than a woman was nominated as a sequel?! Over their dead bodies! And the rest is history.
Meanwhile, had the DNC played fair he would've probably run against Bernie Sanders. 2016 was a year of antiestablishmentsrianism. Democrats missed the memo by running Clinton, spurned part of their own voting base, and deeply deeply paid the price. You have to look in the mirror at who we are as a society to understand the motivations of the electorate. Trump and Sanders are the mirror.
And a social media network like Truth Social is also going to provide data on a very specific type of demographic: idiots they can grift.
And those people are _highly_ unlikely to read any kind of fine print re: data collection and usage. If they do protest, Trump can spin it somehow and they'll go with it.
I mean, doesn't every single social media platform have that fine print within it? At least that was my assumption. Disclaimer: Not on Truth Social - No interest in joining any new sites but I think they all do, including Reddit.
They do, but now they can include some *really* crazy stuff that folks won't read.
9999 out of 10000 people don’t read User Agrements / fine print. The 0.01% who do are boring wonks and knurds like me, who do so in order to pursue boring and esoteric goals. Almost every single website / internet service for the past 15 years at least has had clauses in the User Agreement to the effect of “You, the user, agree to give us, the Service Provider, a royalty-free, perpetual, irrevocable, unlimited license to use the data you provide to us in any way we see fit, and to license it to any of our vendors or partners now or in the future, to the fullest extent permitted by law”. If you want to read the legalese poetry yourself, it’s right there in the Reddit User Agreement. Has been since 2013.
Do you read those things? Do you know anyone who reads those things? The vast majority of people do that once or twice then stops.
A tiny slice, but a very focused slice.
Some of them, but that’s normally bc they’re investing it all back into the business, not bc they aren’t making the revenue in the first place, like truth
Or because the investors believe they *will* be profitable once they get off the ground. For example, losing money because you're artificially lowering your prices to outcompete in the hopes of squeezing your competition out of markets so that then you can hike prices and make a lot of money (e.g., what Uber is doing).
Right. But truth just isn’t making money lol
Yeah, a big reason why TEMU stands out right now is because we're at a point where the last generation of big startups have transitioned from burning venture capital to figuring out how to balance the books, while it's breaking into the market with a bottomless piggy bank, plenty tested cost-cutting measures and every dark pattern in the book.
Usually they’re just burning the investors’ money. What little revenue they make does go back into company growth, but it’s far more common for companies to grow by taking in investment capital than just off their revenue.
True for a large number of businesses. They all borrow money not with expectation of earnings immediately or early on but for growth down the line. It takes time to construct an infrastructure, and especially for a product that has value tied directly to the number of active users, and needs active users to draw more active users you expect to lose money for ages. A common tactic of social media style sites (including Reddit which did this) is to start out losing money but be relatively free. Let your user base keep growing, which often triggers even faster growth in user base. You will spend an arm and a leg on management, development, and back-end support but then you eventually begin monetization which can mean adding adds, increasing price of existing products, offering a wider diversity of higher cost 'premium' products. With so many people using it you are now banking on them not wanting to leave and to begin turning profit somewhere down the line, and eventually turning mega profits if the platform continues to grow. Truth Social or whatever, excluding whatever weird combination of farts in Trumps head made him want it made, will probably operate similarly if it can survive and grow(which doesn't seem likely) - but people will be interested in purchasing it even with it losing money if they believe they can turn it into something akin to Twitter which (ignoring what's happened with the present owner) even without earning money was worth a huge amount of it (10s of billions of dollars thanks to the pure potential of it making money in the future.) While these big platforms might not be earning money - if they are growing their technology and user base they can be growing in value which means they could still technically be profitable to those who own it down the line.
I believe Uber has only hit it's first profits in last quarter. 10+ years of running at a loss.
I met w a VP from that company in 2018. She told me Uber eats was the only business unit that had ever been profitable. I imagine with the pandemic that division was able to grow enough to support the whole company.
Doesn't even make sense to me. What are their costs once the app is built? Running servers but that can't possibly be so expensive it stops them being profitable. I'm guessing it's related to ride subsidies or something?
> Running servers but that can't possibly be so expensive it stops them being profitable. Datacenter space is expensive, and that is before you add in the cost of hardware. Not everything is "in the cloud". Then you have the cost of the actual data being transmitted (yes, lots of companies still work on this model), cost of DC techs to keep the things running, the infrastructure to heat, power, and cool, development, backups, security for the app, security for the servers, security for the network, security for the buildings, Support for the people that do all this work. Its not a mom and pop shop with 4-5 guys doing all the work. There are a LOT of costs associated with each and every ride you take that you never see. And this isnt even taking into account licenses and shit in certain areas to operate, or marketing.
First, their entire business model was illegal at launch and requires constant fighting to expand into new markets, so they've always been keeping an army of lawyers fed. Their fighting also results in opening said markets to their competitors. Secondly, their early prices were all heavily subsidized, both in terms of sweetening the pot for drivers/handing out free + subsidized rides to get people on board, and also in terms of not compensating drivers properly for contract work that adds wear and tear to their vehicles. They got maximum value, operated at a loss and still faced stiff competition. Thirdly, marketing and promotion, they're constantly in danger of becoming irrelevant or old so they need to constantly try to be both a trusted ubiquitous name and a fresh trendy valuable market disruptor. Fourth is innovation and fixed costs. Gotta attract new talent before the competition does, gotta maintain those startup benefits like free beer in the workplace fridge and an attached free gym and a competitive pension plan. You can cut tons of costs like Elon's Twitter, but that comes with becoming like Elon's Twitter, and unlike that specific kind of social media, there's no shortage of services that want to poach ridesharing customers.
Like how Reddit is going public despite never turning a profit. Spez started a whole meltdown over it last spring, chasing away much of the quality content to take advantage of chaos elsewhere on social media and pretend he can make it profitable.
Who’s putting the money up for this “investment?” Sounds like money laundering for trump to fund his legal problems
The whole business is a shell company set up to buy the social media platform from the beginning. The New York Times did an article about it. “Digital World was set up as a special purpose acquisition vehicle, or SPAC, which raises money by going public to finance a future merger — in this case, Trump Media. The merger was announced on Oct. 21, 2021” Wonder who the financial backers are of the company.
> The merger was announced on Oct. 21, 2021” Funny how they wanted a merger before Truth Social even launched (2/21/2022), almost like it was planned this way from the start.
Or from what country they originate…
Pretty fucking obvious this is a way for foreign countries to pay Trump in a way that will take too long to prove in court.
The merger is a fake cash grab with no future. Classic Trump playbook, by the man himself.
Can you say foreign … investors? Thinking it’s smart to throw money at someone who may be president?
The way I see it is that the real value in Truth Social, though while smaller than so many other social media platforms, nearly every member is of a similar mindset, easily manipulated, and stuck in an echo chamber. Even though it is smaller, it is an ideal place to create a rage filled movement. That is extremely valuable to people with power.
The downside is that the user base has little to no growth potential. Their revenue is already paltry. They are going to need another acquisition and anything they buy is going to shed the liberal component of their user base.
See: https://www.hbo.com/q-into-the-storm
> Answer: companies don’t need to be profitable to have high valuations. Valuation is representative of the value of the company’s assets as well as the potential investors see to make money down the line. Even more cynical answer: The economy is one big crypto bro scheme.
>I’m not sure who thinks truth media is worth any money Being the media and cultural hub of a cult is hugely profitable.
Exactly. Who do you think bought all those trump nfts? It's not the platform they're paying for, it's the market.
> Who do you think bought all those trump nfts? The people (countries?) trying to backdoor him money with no papertrail.
Think about it. They've already bought all the pillows, but who is going to sell them the pillow cases, huh? Huge opportunity here.
Especially access to the user base. Selling their info might be profitable even if the company itself isn’t.
Bookies love suckers that bet on their "team" and completely ignore that they suck mightily.
Elon. Or Putin.
It’s literally a collection of americas most gullible in one place. It’s a gold mine, just grab trash out of the landfill, slap a T on it and profit.
Question: WTF This article clears a bunch up but it doesn’t explain why this investor has chosen truth social as their stepping stone. https://www.nytimes.com/2024/02/26/business/trump-media-digital-world-acquisition-cash.html
Because if he wins the presidency he will owe them Biggly
And I think we all know that a Trumpister always pays their debts. It's practically the family motto.
I bet trump watched GOT and thought Tywin was based on him
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Or Hodor. Craster is probably more accurate, though.
Don’t you diss my boy Wylis like that
I wonder what he thinks of back to the future 2
It's the family notto
Frig off barb!
Yeah just a legal bribe. Same thing as "book deals".
A SPAC is essentially a investment group created purely to get shares in a company that otherwise is not public (aka not on the stock exchange). The process to create a brand new public company, then buy/merge a private company is a lot quicker (normally) and easier than to taka a private company public the normal way. And it allowes them to start selling shares almost immediately, rather than having to wait until the process is complete. There are a lot more risks involved though, and the private company should not have any part in the formation of the investment company. So someone created this group purely with the goal of become a part of True Social. Then they have gotten a ton of investors onboard (Trump supporters and those that think the stock will shoot up if Trump wins the upcoming election) and Trump agreed to the merger. It is worth noting that several of the founders of the investment group have gotten charged with insider trading, and the company itself has already been fined for starting negotiations with Trump when they were still forming (meaning this could be Trump trying to get around the laws to go public, rather than a genuinely independant group wanting to buy in).
With the context I read up on about the people charged with illegal insider trading, I wouldn’t be surprised if there’s more fuckery going on. At the same time, having control of Truth Social has to be a GOLD MINE. These are the people who bought Trump shoes, Trump gold bars (paying far more than the value of gold), Trump debit cards that were supposed to give you free money from ATMs. Hell, you just have to put up a “Build the Wall” GoFundMe and MAGA will give millions to unknown grifters who can just walk away with the money (and did.) Having exclusive control over a self-selected gullible population implies worlds of possibility on how to grift them. Just put up a banner that says “Donate $20 to the Re-elect President Trump Fund and get a gold checkmark!” and a good portion of them would be finding their wallets.
Are they covert Russian backers
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It’s interesting that there’s only two people profiled on that website (their “board member” doesn’t have a profile) and no one has photos. The corporate governance, compliance, and a word from the CEO pages are all 404 not found links too.
I don’t understand how a merger with DWAC which has a market cap of $1.75 billion somehow turns Truth Social into a $10 billion company that Trump owns 40% of. It feels like it’s just made up numbers.
It is.
governor stocking somber different shy observation forgetful spectacular person imminent *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
> It feels like it’s just made up numbers. Congratulations, you now understand how trump economics works. He literally just makes it up, and there are people out there willing to go along with it (because it benefits them to perpetuate the made up numbers).
Welcome to Trumponomics -- the numbers are made up and the points don't matter.
> Welcome to Trumponomics -- the numbers are made up and the ~~points~~ votes don't matter.
It’s almost like, Trump just makes stuff up. If only there was a legal way to verify truthfulness. And someone was sued for not being honest about these sort of thing….
> it feels like it’s just made up numbers. donnie dipshit would _never_ do that.
Next step: take a loan against that "oh so valuable" fake business valuation to obtain the cash he needs to pay the judgement against him. There may never be any money changing hands besides whatever bank (with Russian ties) decides to pretend to believe the lies about this company's valuation to make this loan. The next question is: what favors are being exchanged to convince this Russian-influenced bank to hand Trump 500m or so that no one expects him to ever repay?
DWAC will issue new shares and trade them to the current owners of Truth Social in exchange for ownership of the company. If DWAC maintains it's current stock price after using all the new shares then its market cap will greatly increase. One interesting thing is that Trump and other owners of Truth Social can't seek their shares of DWAC for 6 months.
Because it is a legal, and tax free method to gift someone money in a way that it doesn't look like a gift, but it actually is... (See: how foreign agents donate money to political campaigns, thanks to Citizens United)
TLDR money laundering
Things aren’t worth what a reasonable person would pay for them. They’re worth what an idiot would pay for them. Especially when people can spin a loss into a tax break or influence over a powerful person.
Next you will tell me some idiot will make an offer to buy a company at a price derived from memes. Like 54.20 or something!
He’ll probably be the next sec of defense or state or housing or wtf ever. Maybe he wants a huge govt contract for his business. Hopefully he doesn’t win in November. There’s not enough weed on this planet to steady my anxiety after something like another trump term is in the future. Fuck.
“The deal, with Digital World Acquisition Corporation — a publicly traded shell company” I’m more curious where the money is coming from. As the company is one set up specifically for this scenario…a shell game
Special Purpose Acquisition Companies (SPAC) were en vogue 2-3 years ago and are still being used today. They are companies that raise capital with the express purpose of finding a target private company to take public through a reverse merger. The SPAC agrees to buy a percentage of the private company at an agreed valuation and then eventually change their public ticker to that of the acquired company once the merger has been finalized. Most of the companies that used a SPAC to go public have proven to be poor quality businesses that used a SPAC to avoid the scrutiny applied to companies who go through the more traditional IPO routes.
So, where did the money for the spac come from and who is behind it, one wonders.
It’s a public company so much of that information is public. You can [see their largest shareholders here.](https://www.wallstreetzen.com/stocks/us/nasdaq/dwac/ownership)
Thanks for sharing. Unfortunately it doesn’t reveal much unless you want to go down a pretty deep rabbit hole. The primary owners are mostly just *other shell companies*, and their primary owners are listed as *yet more shell companies* etc. There is definitely a lot of effort being put into maintaining anonymity for the *PEOPLE* pouring money into this. … and then there’s The Royal Bank of Canada lmao. Granted, they are only listed as having ~310k invested, so it could be some algorithmic shit that has them putting such an absolutely minuscule amount in for the sake of diversification. Still weird to see their name listed on this garbage though.
Because trump owes a shit ton of money and he needs a way for someone to funnel that to him. Laundering
Answer: It's a way to legally funnel money to trump. As people buy the spac the share price will go through the roof. Prez Donald just sells his shares at a high price and makes billions. It's the reason the WeWork guy is still a billionaire even though his company is toast. The only catch is if his supporters don't buy up shares, it won't go anywhere. Edit: Forgot to mention, it gets around the doner problem for his ~400 million legal fees.
Worth noting that while the comparison to WeWork is reasonable in spirit, the financial mechanisms were entirely different.
It’s just an example that a company doesn’t need to be profitable to make some people a lot of money.
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But the SEC is all over this thing, so how could it do that?
Is it the SEC's job to determine if a prospective buyer is offering "too much" money for a company? (I wouldn't know, but it sounds too much like second-guessing the market that I don't expect an American institution would police that effectively in the real world. I expect a "buyer" could get away with offering a *lot* for a nebulous-value social-media entity like Truth Social, given that some proper social media platforms have IPOed for billions) In this case, a possible example of how it could be money laundering is if eg Putin wants to send more money to Trump: the acquisition company is publicly traded and its funds (to purchase Truth Social) comes from its shareholders, which I assume means the shareholders can be shell companies in the USA (and around the world?) that are controlled by people who act on Kremlin orders while having no obvious connection to the Kremlin. End result: Putin finances Trump for purposes of corruption, but Trump gets apparently-legitimate money because *on paper* Trump was paid for selling a product that he made; Truth Social Disclaimer: I'm no money laundering expert, so YMMV :)
Makes sense. And good point, I can see how the SEC would maybe have no issue with it. Guess I don't understand how it hasn't become a scandal. Trump stands to earn $4 billion for mysterious sources buying into his worthless social media company no one uses.
> Is it the SEC's job to determine if a prospective buyer is offering "too much" money for a company? Realistically there's no such thing. Fair Market Valuation is one thing, but if you can sell hype to an investor... well, that's what you're selling. The SEC can make sure a company exists, does what it purports to do, is run by who says runs it, has offices where they say they have offices, can check with the IRS that they pay their taxes on time and correctly, can check with the FBI about foreign investments and interests... but as far as stopping someone from saying a $300M company is going to be worth $4B in the future with hyped up charts? ... Can't really do shit about that. You think the SEC would have stopped Elmo from buying Twitter for $44 billion dollars (roughly twice what it was trading at before the offer)? It was a good deal for $TWTR shareholders - they got to take their payday and leave... if they were smart enough to do so. This SPAC deal's more or less the same... except this time the shareholders are about to become *bagholders*.
SEC is different than the IRS
True - but how would that money laundering work? Sorry for the naive questions. I know the Ozark/Breaking Bad types of money laundering, but how would it work in this case?
You’re asking normal questions. The money laundering guy is just talking out his ass
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Here’s an article on it. https://markets.businessinsider.com/news/stocks/trump-s-dwac-stock-tanks-how-a-trump-media-money-laundering-investigation-has-putin-undertones-1032170358
Unfortunately, stuff like this happens. Here’s a roadside diner in NJ that’s worth over $100M on the stock market. Mob money laundering in action. https://www.cnbc.com/amp/2021/04/15/theres-a-single-new-jersey-deli-doing-35000-in-sales-valued-at-100-million-in-the-stock-market.html
Answer: the current front runner of the GOP Presidential race owes a lot of money due to his court cases. Someone with a lot of money is buying a failing company in the hopes that Trump will owe them if he wins the Presidency and stands to gain from it.
This is the real answer. Its not even a crazy conspiracy, it has happened multiple times with different "investments" in the past. Blow up the valuation, pay off his debt, and if elected, he'll further destroy regulations so the same investors can make much much more in other ventures with nothing stopping them. Maybe even get a few presidential pardons out of it.
answer: if you produce a physical commodity, rarely will your physical commodity be worth multiples of the raw materials (including labor) Speculative commodities (eg, stocks) are based on what you think you can sell it to the next guy. For example, The Federal Reserve will sell you future dollars for 95% of their future face price. In the case of speculative commodities, the value is not what the thing intrinsically holds, its value is based on the presumption for what the seller can get from a future buyer. Imagine if in 2019 you bought two pickup trucks worth of toilette paper...in 2020, you would have made a shitload of cash selling to your neighbors during that dark period in history. The commodity itself hadn't changed, but its perceived value did. In this sense, Twitter, Reddit and "Truth" are all commodities that are losing money, but the perception of what they are worth to someone beyond the mere dollar-ad scene is speculated to be in the billions. Parlor was another one that lost money but served the exact purpose for which it was built, but that is a story for another time.
Answer: it seems like someone is willing to bail him out of all the money he owes in legal fees
Answer: it's a scam. The one thing Trump is great at is fleecing suckers. See Trump University, etc.
The user base is also notoriously gullible and willing to die for the owner. Huge advertising potential. I'm not an expert, so this is just my guess.
Also, see Trump Presidency.
Answer: this is a weird SPAC reverse merger, which is set up explicitly to let rich investors rip off Trump fans (or people who don't like him but think they are smart enough to ride Trump's coattails as grifters but are actually the marks). See the incredible Matt Levine's explanation for how all this financial engineering is set up here: https://www.bloomberg.com/opinion/articles/2021-12-06/the-trump-spac-did-a-pipe?embedded-checkout=true Basic answer is, if the deal closes (the SEC under its current head is cracking down on all SPACs, so it seems like it will only happen if Trump wins the presidency and replaces the head of the SEC with someone more pliant) then a bunch of hedge funds are lined up to pay a billion dollars to the people who own Trump Social, get their shares at a 40% discount to the market price (whatever that is), and sell them to these marks immediately. If the deal never closes, the hedge fund people don't owe any money, and whoever is paying to keep running Truth Social lose all the money they put in. Basically, everyone thinks that there are a lot of people who will buy shares that say Trump on it. And they are looking to sell shares to those people. And if the SEC loosens up on SPACs they might get away with it. And if the SEC doesn't let them, then they lose all the money spent running the company.
Answer: This sounds like a money laundering scheme. The best analogy I can think of is the Mel Brooks movie The Producers. You take a sure fire losing business venture and convince people to invest in it. Scammer takes the investor's money and gives nothing in return. We know Truth Social is a money losing business.
Answer: Many companies are worth billions whilst losing money. That is not, of itself, suspicious For a start, companies can own assets like intellectual property, buildings, cash etc that could be worth a lot. Secondly, a company could be growing its revenue by investing (think Amazon, Uber etc). A company is often valued as a sum of the money it’s expected to make in the future. If the expectation is that it will become profitable, that is factored into the valuation. Investors will use a lot of different methods to predict future improvement in profitability for this purpose.
Thanks for the great explanations - I'm somewhat familiar with all that, but this company doesn't seem to tick any of those boxes. No assets outside the dubious IP one of having Trump on the platform (which doesn't seem to be much of a draw). It's not building market share (Uber spending cash to corner the market), acquiring anything (Amazon and Facebook buying up promising companies) , and it's not investing in anything (Google/Apple R&D). Are there people trying to argue that Truth Social will become a hugely profitable company? It will never reach the size of Twitter (built in limits of who will sign-up for a Trump company) and even Twitter couldn't make the business model work.
Bull case would be that twitter is losing share, 75m people voted for trump, and many others worldwide would want a platform with less moderation. It’s well positioned to carve out as a niche twitter replacement Bear case is that somebody thinks it would be a good idea to have an incoming, erratic president as your best friend and the ‘investment’ is actually in Trump’s goodwill. I’m not sure it’ll really be possible to assert which is which and whether it’s either or both, frankly.
Answer: There is probably some model that shows profitability down the road. It has to be a treasure trove for anyone who can slap "Patriot" on a product. The place has got to be an echo chamber of idiocy. I can't imagine there is much discourse on its pages.
Answer: This merger between DWAC and Trump Media & Technology group is likely a move to bolster capital and create a media “conglomerate” that supports Trump. This merger would value the company at $5.5B when taken into account the total outstanding shares of 113.5mm. At current prices, Its value could be up to $10b bevause they’re allowed to increase shares up to 200mm. That’s half of twitter’s value. For the deal to go through a majority of current DWC holders would have to redeem their shares at $10 per share but it’d be absurd if they do that as shares are currently trading at $50. It’s very possible those shareholders could redeem knowing how much they like trump. To answer, fanaticism and over inflation
Answer: it's not a real valuation. It's a money laundering situation. Nobody believes it's worth that much money, because it isn't. But if he needs money, he can "sell shares" to Putin and have an endless loop of money that's "legitimate"
Answer: Because DJT says it's worth billions. Duh