Trump’s Truth Social Play Is Already Failing

On the day after Easter, Donald Trump, who likes to compare himself to Jesus Christ, told the truth about his social-network platform Truth Social, and the truth did not set him free. It cost him about $1 billion as Truth Social’s stock price dropped 21 percent.

The bad news was delivered in an 8-k form filed with the Securities and Exchange Commission, and accompanying documents. These materials reveal that Truth Social, which was valued at about $8 billion when the stock debuted last week, lost $58 million last year. Revenues were only about $4 million, and Truth Social “expects to continue to incur operating losses and negative cash flows from operating activities for the foreseeable future.” At the end of trading Monday, Truth Social’s value was marked down to (a still wildly-inflated) $6.7 billion.

Well, that’s what Trump gets for taking a business public. The SEC is an agency with which Trump seldom interacts because his businesses are almost always privately held. It’s easier to keep secrets at a private business. The last company Trump took public, in 1995, was Trump Hotels and Casino Resorts, of which Trump was chief executive from 2000 to 2005. It didn’t end well. Under Trump, the company lost money every year; its stock price fell from $35 to 17 cents, according to a 2016 investigation by Drew Harwell in The Washington Post; and, in 2004, Trump Hotels and Casino Resorts filed for bankruptcy. On the plus side, Trump walked away with $44 million in accumulated salary, bonuses, and other compensation.

It’s much harder to lie to the SEC than it is to lie to a bank or insurance company about a privately-held business. That’s because reporting requirements for publicly-held companies are sufficiently extensive that if you make stuff up there’s a much better chance somebody will notice, and if somebody notices there’s a much better chance you’ll be punished. The SEC’s success rate is about 90 percent in administrative-law proceedings and about 69 percent in court proceedings. (There is also the possibility of a criminal referral to the Justice Department.) Indeed, in 2002 the SEC nailed Trump for submitting questionable earnings numbers on Trump Hotels and Casino Resorts. Trump settled the matter for an undisclosed sum.

Truth Social’s chief executive is Devin Nunes, a former Republican representative from California who defended Trump in his first House impeachment. Judging from the SEC filing, Nunes would not appear to be a very skillful businessman. Even before the bad news spilled out from Monday’s SEC filings, it was known that the company lost more than half its monthly active users over the previous year, falling to fewer than half a million at a time when Facebook, Twitter, and Threads all exceed 100 million. As I observed last week, customers seem to prefer Trump’s stock, which last week cost $70 per share, to Trump’s product, which is given away free of charge. If you think of Truth Social less as a business proposition and more as a political movement, the public is keener to own it than to join it.

It’s perhaps unfair to blame Nunes for Truth Social’s failure when you consider that—as with Trump Hotels and Casino Resorts (which bore the same stock symbol, DJT) —Truth Social was never intended to be much more than a scheme to enrich Donald Trump. At Truth Social, Trump holds no management position, even though he owns a 57 percent majority of stock in its parent company, Trump Media & Technology Group. The stock does not represent any investment on Trump’s part; he was given it free of charge, mostly for the use of his name. If Truth Social has failed to succeed as a social-media platform, that’s probably because, like the Trump Shuttle, Trump Vodka, Trump Steaks, and the infamous Trump University, it’s really just a branding opportunity to score Trump a quick buck.

Trump does little to disguise this. Will Wilkerson, a former executive at Trump Media & Technology Group, told The Washington Post’s Drew Harwell that in October 2021 he was chatting with company co-founder Andy Litinsky, a onetime contestant on “The Apprentice,” when Trump rang up Litinsky’s cell phone. Give some of your shares to Melania, Trump told Litinsky. (At the time Trump owned not 57 percent of all shares but 90 percent.) Litinsky did not comply, and five months later, he was kicked off the company’s board. In an email to Wilkerson, Litinsky said this was retaliation, plain and simple. Last month Litinsky sued Trump demanding a bigger stake.

Truth Social’s failure as a business (as opposed to a stock) was pre-ordained. One poll cited in the SEC filing says that only one-third of all voters would use a social-media site associated with Trump. Another says that nearly 40 percent of all Republicans would avoid the platform. “If President Trump becomes less popular,” the company says in the SEC filing, “or there are new controversies that damage his credibility or the desire of people to use a platform associated with him, and from which he will derive financial benefit, [Truth Social’s] results of operations could be adversely affected.” That makes it sound as though Truth Social is succeeding now, while Trump is the presumptive Republican nominee, and of course it is not, except as a stock bubble from which the air has already started to go out. Further threats to the business model cited in the filing are Trump’s possible death, incarceration, or “incapacity.” (On this last, it may already be too late.)

Last week I noted that Trump would be sorely tempted to cash out his holdings in Truth Social—to, in effect, Trump and Dump. Knowing what I know now, I’m surprised he hasn’t done so already. Trump is not a guy who likes to leave $1 billion on the table, and before this week is out he could lose another $4 or $5 billion. Maybe he really is losing his fastball.