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Notes -
Paging @2rafa
So what's the deal with Truth Social? It's completed its merger with DWAC, and it is being widely reported as a potential $3bn windfall for Donald Trump. Who would that $3bn come from?
Reports are that Truth Social has a comically small number of users, less than 1% the ADU of Twitter. It booked $3.4mm in revenue and lost $49mm in the first nine months of 2023. They're apparently planning a dividend which would appear to be in excess of total revenue! Perhaps in 2020 there was an opening for an anti-woke twitter alternative, post-Musk acquisition Twitter might have closed that gap, and various alternatives like Mastodon-instances offer an alternative. The problem for Truth social is that its growth theory is that DJT-Thought goes mainstream and people sign up, but in that case the existing social media giants would simply change their own moderation policies, the long term growth strategy is for MAGA to hold enough of a grudge to refuse to go back to R/TheDonald.
The share price has rallied from meme-stock Buy-and-HODL by Trump fans. That dynamic is well understood at this point. But where, if DJT sells his shares of DJT, is the hypothetical $3bn dollars going to come from? For Gamestop and AMC, the money theoretically came from a short squeeze, as shorts had to cash out their positions at a major loss, and shares were near or over 100% short so it was impossible to cash out. The short interest in DJT is more modest, at around 10%, so there's no $3bn in shorts to soak. Trump fans aren't going to fork over $3bn. What major market player is going to sink billions into a social network with no users? Until it makes some kind of profit it won't make most indexes or fund managers, so it won't be automatically purchased that way. He could try to borrow against the shares, but who would lend it?
I feel like there's something missing. Because the WSJ is reporting that Trump is getting a $3bn windfall, but then pointing out all the ways that he obviously won't/shouldn't get that windfall. I'm lost. Can anyone explain this to me?
ETA: Shares are SPIKING on the IPO to close to $70 this morning.
I think it’s just Trump’s fans pumping the stock at retail. There are millions of true believers out there and as long as they keep buying and don’t sell, the valuation is going to stay unreasonably high. Most funds are going to want to stay away from short plays because after GameStop taking on retail is unpredictable and because it’s not worth becoming an official enemy of Donald Trump, being called out in a million angry tweets/truths™️ and in White House press conferences if he gets re-elected and getting harassed by his supporters. All this means the stock has a tendency toward exuberance, especially as Trump comes closer to returning to the White House and supporters see this as a campaign contribution that might even make them money.
Apparently there is 10% short interest, so someone is willing to sell the stock short. My guess is retail - as you point out any big investor who shorted DJT could expect punishment if Trump wins in 2024.
The most likely scenario for small investors in DJT to make money (other than by selling on to Greater Fools) is that Trump wins the election and a big Russian or Chinese company overpays for DJT in order to curry favour with the US government.
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