Trump's social network valued at $8 billion

On Tuesday 26th March, Donald Trump’s social media platform, Truth Social officially went public with a closing valuation of over $8 Billion.

You may have heard about Trump’s gripes with social media platforms, having been banned from X (previously Twitter) and Facebook but you probably hadn’t heard that Trump formed his own social media platform back in 2022. After just over two years the company is now listed on the the Nasdaq via a SPAC reverse merger.

How did this happen?

Here’s the story:

The Very Beginning

Donald Trump joined Twitter back in 2009 and was a prolific ‘Tweeter’, having tweeted around 57,000 times over the 12 years the account was active, on average over 12 days a day.

This tweeting ramped up during Trump’s election campaign and through his presidency term, with 8,000 and 25,000 tweets respectively. In 2019 congress began moderating Trump’s tweets following retweets of ‘racist comments’ however this only sparked increased activity from Trump.

In 2020 Trump spread misinformation about the COVID-19 pandemic and also falsely suggested that postal voting or electoral fraud may compromise the election during his 2020 re-election campaign. But it would be Trump’s involvement in in inciting the January 6, 2021, attack of the US Capitol during the formal counting of electoral vote that was the final straw for Twitter & Facebook.

Trump gave a speech at the protest in which he repeated claims of election irregularities and said, "If you don't fight like hell, you're not going to have a country anymore." As Congress began the electoral vote count, thousands of attendees, some armed, walked to the Capitol, with hundreds breaching police perimeters.

Misinformation about US election fraud fell 73% after President Trump was banned or restricted on social media, according to one analysis.

Truth Social Is Born

In February 2021 Trump Media & Technology Group, the parent company of Truth Social was incorporated. A year later the social media platform, Truth Social, is released and Trump makes his first post (called a “Truth”).

Their gameplan:

• Beta test with 500 users in February 2022

• Release to the public in March 2022

• Rely on Trump’s following, and lack of access to Trump’s thoughts on other platforms, to pull in users

And, given its current valuation, many would have guessed that it would have been a rapid success… but Truth Social struggled.

In early March 2022, multiple sources reported that Truth Social usage remained low, with even Trump not having posted to his account since his first message two weeks earlier and his account having only 140,000 followers - less than 0.2% of the 90 million followers he had on Twitter before his account was banned.

There was an early backlog of 500,000 people on the waitlist after the launch but a month later there was only 60,000 sign ups per week.

Fast forward to 2024, SimilarWeb estimates Truth Social had 5 million monthly website visits globally in February 2024 whilst Twitter boasts over 500 million monthly users. Not exactly a roaring success..

Here’s the Deal:

Preparing To Go Public

To facilitate becoming a publicly traded company, a special-purpose acquisition company (SPAC) called Digital World Acquisition Corp (DWAC) was created in September 2021.

On October 20, 2021, TMTG and DWAC announced that they had entered into a merger agreement that would combine the two entities, allowing TMTG to become a publicly traded company.

In December 2021, TMTG said it had raised $1 billion in private investment in public equity (PIPE) funding. The investors are unidentified. The Financial Times reported the expected proceeds of the PIPE and SPAC funding to TMTG would be $1.25 billion.

On November 13, 2023 DWAC filed prospectus relating to the proposed merger of DWAC and TMTG and the report left plenty to be desired. With only $2.3 million in revenue for the 6 months ending 30 June 2023 and a loss of $23 million.

Although the financial position of the company matters, the most important metric for investors is the monthly active users. Below we can see that Truth Social has just a fraction of the user base that other tech companies had prior to listing.

Investor Reactions

The TMTG share price surged in the first day of public trading, reaching a high of a $10 billion market cap before moderately dropping to a closing valuation of close to $8 billion.

The valuation of over $1,000 per user shows a significant disconnect from the ~$100 per user on other social media platforms. Last week’s reaction to the IPO was a signal that investors think Truth Social will garner more users and soar in value if Trump beats President Joe Biden in November.

Others speculate that the pumped up valuation may have a more sinister motive of political manipulation “It looks like there's an opportunity to influence a candidate,” says Virginia Canter, the chief ethics counsel for the watchdog group Citizens for Responsibility and Ethics in Washington (CREW).

What is clear is that the valuation doesn’t represent the company in its current position and it’ll be interesting to see how it trades in the lead up to the election in November.