Donald Trump’s Truth Social: Could he reap billions from the controversial platform?

In the shifting landscape of social media, Truth Social has emerged as a significant player with an ambitious goal and a controversial figurehead. Founded and largely owned by former US President Donald Trump, the platform brands itself as a defender of free speech in an era increasingly dominated by tech giants. 

With Trump holding a substantial stake in Truth Social’s parent company, Trump Media & Technology Group Corp (TMTG), the platform’s potential financial rewards for him are substantial.

Trump’s financial stake and potential profits

Donald Trump’s involvement with Truth Social is more than just symbolic; he holds approximately 65% of TMTG, equating to 114,750,000 common shares as of July 2024. 

This significant ownership places him in a position to potentially reap enormous financial benefits. Trump may soon have the opportunity to sell some of his shares, possibly as early as September 2024, just before the US Presidential Election. 

This timing could enable him to realize substantial profits, potentially in the billions.

Additionally, Trump is entitled to up to 4,061,251 warrant options, which can be converted into shares, further enhancing his potential financial gains.

Truth Social’s stock performance and meme stock phenomenon

Truth Social’s stock performance has been a rollercoaster. 

It reached a peak of $66 in late March but subsequently fell to around $33, although it remains significantly higher than the $10 offered to early investors. 

According to Stanford Law School professor Michael Klausner, this volatility is indicative of the “meme stock” phenomenon—where social media buzz, rather than fundamental business performance, drives stock prices.

Challenges facing Truth Social

Truth Social was created to counter what its founders view as “Big Tech’s assault on free speech,” appealing to users who feel marginalized on mainstream platforms. 

However, translating this ideological support into substantial user engagement is a significant challenge. 

The platform has been notably opaque about its user metrics, making it difficult to assess its actual reach and influence. This lack of transparency is problematic, particularly because user engagement is crucial for attracting advertisers, who are essential to the business model of most social media platforms.

Moreover, Truth Social’s financial health raises concerns. In the first quarter, TMTG reported a loss of $328 million on revenues of just $0.77 million. 

Despite these losses, investors continue to support the company, betting on Trump’s ability to leverage his political brand into a profitable media venture.

The future for Truth Social and TMTG

As Truth Social seeks to establish its position in the US social media market, it faces a dual challenge: fulfilling its promise of free speech while developing a viable business model. 

The platform’s success will depend on its ability to convert political support into active user engagement and, importantly, to monetize that engagement effectively.

The coming months are crucial for Truth Social. With potential share sales on the horizon and the 2024 election approaching, the intertwining of business, politics, and social media will be closely scrutinized. 

Whether Truth Social can truly rival established social media giants remains uncertain, but its journey offers a compelling case study in the intersection of technology, politics, and finance in the modern digital age.

The post Donald Trump’s Truth Social: Could he reap billions from the controversial platform? appeared first on Invezz