End of the Line for Truth Social? Merger Woes Threaten Trump's Media Platform

AP Photo/Seth Wenig

Truth Social might be in a bit of trouble. And when I say a bit of trouble, I mean the platform could be shutting down altogether if the stars do not align. The company, established in October 2021, is reportedly on the brink of collapse due to its troubles merging with Digital World Acquisition Corp.

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The platform was meant to become a tech behemoth worth up to $1.7 billion. But with the deal in jeopardy, this might not come to fruition:

When former president Donald Trump’s media start-up announced in October 2021 that it planned to merge with a Miami-based company called Digital World Acquisition, the deal was an instant stock-market hit.

With the $300 million Digital World had already raised from investors, Trump Media & Technology Group, creator of the pro-Trump social network Truth Social, pledged then that the merger would create a tech titan worth $875 million at the start and, depending on the stock’s performance, up to $1.7 billion later.

All they needed was for the merger to close — a process that Digital World, in a July 2021 preliminary prospectus, estimated would happen within 12 to 18 months.

“Everyone asks me why doesn’t someone stand up to Big Tech? Well, we will be soon!” Trump said in a Trump Media statement that month.

Now, almost two years later, the deal faces what could be a catastrophic threat. With the merger stalled for months, Digital World is fast approaching a Sept. 8 deadline for the merger to close and has scheduled a shareholder meeting for Tuesday in hopes of getting enough votes to extend the deadline another year.

If the vote fails, Digital World will be required by law to liquidate and return $300 million to its shareholders, leaving Trump’s company with nothing from the transaction.

The deal has been fraught with challenges having been postponed six times. The issues include scrutiny from the Securities and Exchange Commission (SEC), allegations that Digital World engaged in early conversations in violation of rules governing special purpose acquisition companies (SPACs), and a slew of internal problems, such as the termination of the chief executive and insider trading allegations against a former board member.

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If the vote for another extension fails, Digital World will be compelled to liquidate and return $300 million to shareholders. This would leave Trump’s company with empty pockets.

SPACs, also known as “blank check companies,” are investment vehicles that allow investors to invest in private equity-type transactions. Investors set up these entities with the purpose of pursuing deals in certain industries. The only purpose of this type of business is to raise capital through initial public offerings (IPO) to acquire existing businesses.

Digital World’s funding consists largely of small-time retail investors, which makes it difficult to get sufficient participation in critical votes. Trump Media blames the SEC for the myriad of delays, accusing it of political sabotage. The SEC counters by claiming that Digital World made “material misrepresentations” to investors.

There is also the reality that Truth Social has not lived up to its ambitious goals. In July, it had about 500,000 monthly active users in the U.S. This fell far short of projections that it would reach 41 million users by the end of 2023. Indeed, former Fox News host Tucker Carlson decided to air his interview with the former president on X, the social media platform formerly known as Twitter, instead of Truth Social.

The future of Truth Social remains uncertain. But if it does go under, there could be a silver lining – it could prompt the former president to return to X. If he comes back to the platform, we can already imagine the hilarity and triggering that will result, right? We already saw what happened when Trump posted his mugshot on the platform. Using X might allow him to once again dominate the headlines as it would get engagement from a wider swath of users – including those on the left.

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Another disadvantage of Truth Social is that it attracted primarily those on the right. This created an echo chamber similar to other “free speech platforms” that tried to position themselves as alternatives to mainstream social media sites.

The hurdles Truth Social faces are not to be taken lightly. The clock is ticking and the companies involved have limited time to make a deal. If things fall through, then Truth Social might be no more. But, if Trump comes back to X, it might actually benefit his campaign for the presidency more.

 

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