Truth Social SPAC Down 9% As Trump Denies Reports Of Financial Trouble

Topline

Shares of Digital World Acquisition Corp (DWAC), the blank check company with plans to take former President Donald Trump’s media site Truth Social public, fell 9% Monday morning after Trump denied recent reports the company is struggling financially and owes more than $1 million in unpaid fees to a conservative vendor.

Former President Donald Trump departs Trump Tower in August.

Key Facts

In a post on Truth Social Saturday, Trump claimed the “Fake News Media is devastated by how well TRUTH is doing,” so they are “working overtime to criticize and demean it,” after several outlets reported the company is facing financial woes, including owing one of its vendors, RightForge, a company that provides internet hosting services for conservative causes, $1.6 million in backdated payments.

DWAC cautioned last week after the FBI’s raid of Trump’s Mar-a-Lago home that if the former president becomes “less popular” or has “further controversies that damage his credibility,” Truth Social could suffer, the company wrote in a Security and Exchange Commission filing reported on by the Washington Post.

In his post on Truth Social on Saturday, Trump claimed that although the media has said Truth Social is “doing worse” since federal agents searched his property earlier this month, the social media platform is actually “doing MUCH better, up more than 550%.”

Truth Social app downloads did jump almost 550% the week following the raid compared to the previous week, according to Vice, which cited numbers from data.ai, a company that tracks app downloads, though the social media site’s iPhone app store rank fell gradually over the course of the week ending August 22, according to the company.

Tangent

Truth Social’s trademark application was also rejected this month because the U.S. Patent and Trademark Office said the name, and in particular, the word “Truth” was “confusingly similar” to other companies’ names. The patent office pointed to another app called “VERO — True Social,” which was launched in 2015.

Big Number

$6.5 million. That’s how much DWAC has lost in the first half of the year, according to SEC filings first reported on by the Post.

Key Background

Trump announced he would launch his own social media site to counter “liberal” media platforms last October after he was barred from major platforms following the January 6 insurrection. He has increasingly used the platform to amplify his voice since federal agents executed a search warrant at his Mar-a-Lago estate this month, recovering hundreds of classified documents. The raid was related to a broader probe by the Justice Department, which believed there was probable cause Trump had committed a crime by holding government records, including top secret materials, at his Florida home. Trump and his allies have framed the search as political persecution. The FBI raid initially led to a spike in Truth Social activity, according to the Post, though overall, traffic has slowed and DWAC’s stock price has fallen almost 75% since its highest in March. The social media site has also been plagued by technological glitches and resignations from top executives. DWAC’s board of directors has also been subpoenaed by a federal grand jury in New York, while it faces a separate probe from the SEC. The SEC investigation came after multiple outlets reported Trump had met with DWAC Chief Executive Patrick Orlando before the company went public, potentially breaking SEC rules that prohibit SPACs from identifying a target company before raising money.

Crucial Quote

In an SEC filing last week, DWAC said that while Trump Media and Technology Group, Trump’s organization behind Truth Social, believes there is “sufficient demand for a true free speech platform,” the former president’s “image, reputation, popularity and talent” will determine its success, warning its value could “diminish if the popularity of President Trump were to suffer.”