Trump’s dazzling Truth Social SPAC
His social media site lost millions. Then it made him $5 billion in a single day.
America’s career conspiracy theorists floated the notion that Taylor Swift would use her mass clout at the Super Bowl to endorse Joe Biden. Coming off a year of astonishing sales for her music and concerts, and with a net worth estimated at $1.1 billion, Ms. Swift presumably was the world’s greatest celebrity moneymaker, until she dropped to No. 2, displaced by Donald J. Trump.
Mr. Trump, the former U.S. president and legal celebrity, increased his net worth last week by nearly $5 billion. Mr. Trump’s windfall came after his social-media platform, Truth Social, merged with a special-purpose acquisition company, or SPAC, called Digital World, and began trading last week on Nasdaq under the ticker symbol DJT.
By day’s end, the Trump Media & Technology Group, which had produced only $5 million in sales since its 2021 inception, was worth some $8 billion. As 57% owner of the company, Mr. Trump’s share-in-a-day gain was more than $4.5 billion. Dazzling.
Swiftians might object that her wealth is business profit as normally understood, whereas Mr. Trump’s Truth Social site until now has produced losses. Who cares about that anymore? The investing world, and its cemetery, is filled with no-profit startups whose initial sky-high valuations turned mostly on hope they might make money.
The Trump play is a little different.
Mr. Trump’s financial fireworks confirm an emerging reality. Increasingly the public face of politics belongs to influencers, such as Reps. Alexandria Ocasio-Cortez, Marjorie Taylor Greene and Matt Gaetz, who’ve discovered the power and profit of mass online belief.
The future of the investments in Mr. Trump’s SPAC turns on one thing: his winning the U.S. presidency. If he loses, the billions fizzle. The company’s shares fell 21% on Monday, wiping out about $1 billion of Mr. Trump’s stake, after the company disclosed it had nearly no cash at the end of last year. The stock rebounded a bit this week.
The success of early trading in Mr. Trump’s all-but-cashless social-media company helped him secure a $175 million bond—owed to New York State in his civil-fraud trial—from Knight Specialty Insurance Co, whose chairman, Don Hankey, said it was a business decision but that he considers himself a Trump supporter.
So “Trump" is now both a political play and a stock-market play. Whatever their financial expectations, obviously many of the people who pumped money into the Trump offering were making campaign contributions by other means. Like the pandemic’s GameStop craze, Truth Social is a political meme stock, as much about belonging to a like-minded group as making money.
Before this, Mr. Trump has had to rely on beating small-dollar donations out of his base with fundraising emails, typically linked to his legal troubles. Now Trumpians can have their cake and eat it, too, both sending their man money and possibly getting it back if the company behind the DJT ticker doesn’t tank.
Mr. Trump’s politicized investors probably don’t care if they lose money, which they likely will if Mr. Trump asks the company’s board, made up mostly of family and friends, to relieve him of the normal six-month holding period before he can sell shares to pay his legal bills.
But what will affect the share price of the Trump Media & Technology Group should Mr. Trump reoccupy the White House for four years? Could the company’s value become tied to Mr. Trump’s approval ratings, with that driven by decisions he makes, or is rumored to make, on tariffs, Ukraine, China and Russia? The idea that Mr. Trump would put Truth Social in a trust or behind a firewall makes little sense. Public consumption of his middle-of-the-night Twitter posts were inseparable from his presidency. Truth Social’s upside would turn on Mr. Trump’s ability to drive up the number of his followers with presidential controversies, real or manufactured.
The world is full of unprofitable high-valuation companies but none, other than maybe ones run by Elon Musk, depend wholly on the behavior of a single individual. Betting on sports has become ubiquitous, but last week National Collegiate Athletic Association President Charlie Bakerurged states to ban betting on the single-game performance of individual college athletes. Truth Social’s daily share price would offer Mr. Trump validation of his presidency through the performance metric he respects—money.
These theoretical conflicts may sound like anti-Trump fodder for Democrats. But his political opponents are more likely to go looking for ways they can duplicate Mr. Trump’s discovery of a new way politicians can harvest golden eggs (a fable of greed that doesn’t end well). Currently pols attract unlimited campaign support through independent political action committees. PAC rhymes with SPAC. Still, the Trump jackpot gives Democrats a new incentive to defeat him and collapse his fabulous on-paper wealth. Forget Letitia James’s property seizures. That’s chump change now.
By the way, with the baseball season begun, another argument surfaces for dumping Joe Biden. If Donald Trump’s SPAC is an exercise in the power of belief investing, Mr. Biden is a case study in the bloodless analytics of Moneyball. Poll data show Mr. Biden can’t hit the curve anymore. Don’t bet your life savings on a president who’s lost a step against the market’s Four Billion Dollar Man.
Write henninger@wsj.com.
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