Truth Social's ugly truth
Truth Social, the app launched by Donald Trump as a free speech platform for conservatives, is facing serious financial and legal stress as it tries to survive.
Why it matters: The app is the former president's biggest business venture since leaving office — and his best effort to create an alternative populist megaphone to amplify his political brand after being banned from Twitter.
Driving the news: Truth Social owes one of its vendors, an internet infrastructure company for conservatives called RightForge, around $1.6 million in backdated payments, sources familiar with the disagreement told Axios.
- The situation, first reported by Fox Business, puts Truth Social at risk of losing the cloud hosting support that it needs to operate.
- Truth Social soft launched in February and rolled out widely to all U.S. iOS users in May. Cloud support, sources told Axios, may have contributed to Truth Social's full rollout delay.
Zoom in: If Truth Social fails to come up with the cash to pay back RightForge, the dispute could move to arbitration, one source noted.
- "RightForge is committed to servicing the client," CEO Martin Avila told Axios. "We were there from the ground floor and we support the president and all of his endeavors and we're committed to building a free speech American ideas based internet.”
The big picture: Beyond financial issues, Truth Social and the blank check company it plans to merge with in order to go public are facing serious legal problems and regulatory probes that could derail those plans.
- The U.S. Patent and Trademark Office (USPTO) has refused Trump's application for a trademark for "Truth Social."
- The blank check company — called Digital World Acquisition Corp. — is under investigation by the SEC for possibly negotiating their deal prior to going public, which is illegal if true.
- An investor sued Digital World Acquisition Corp.'s CEO last year, claiming fraud.
- There's been confusion regarding whether or not certain members of Truth Social's board are actually still on the board, including Trump himself.
Between the lines: Truth Social's financial problems are tied, in part, to setbacks related to the merger.
- Trump Media & Technology Group (TMTG), the parent company to Truth Social, announced its plans to merge with Digital World Acquisition Corp. last year, a move that would take it public.
- Going public would give TMTG access to roughly $1 billion it says it has raised from various hedge funds and investors.
- Last week, DWAC tried to delay its earnings report to securities regulators. The week before, it asked shareholders to approve an extension of its merger agreement with TMTG by a year.
State of play: It's unclear who has been backing the app's operations up to this point. The missed payments to at least one of its top vendors suggest Truth Social is struggling to maintain financial stability while it waits to access that cash.
- According to its latest regulatory filings, DWAC has roughly $293 million in cash held in a trust, which represents the vast majority of its assets.
- Neither TMTG or DWAC has responded to a request for comment.
The intrigue: It's unclear how many people — or exactly who — is working for Truth Social. Most members of Trump's presidential inner circle are not involved in Truth Social's day-to-day operations.
- Its CEO, former Republican Congressman Devin Nunes, makes occasional media appearances to discuss the app, and a few people say on LinkedIn that they work for Truth Social.
- Earlier this year, three top officials in product, technology and legal left the company. Two sources familiar with the departures said the executives resigned in part due to cash flow issues.
Yes, but: The app's administrative challenges haven't stopped conservatives from exploring the service, where Trump now posts regularly without worry about being throttled or banned.
- As of mid-August, the app had nearly 3 million downloads worldwide across iOS (mostly in the U.S. and a few thousand in the UK), per Data.ai, an app measurement company.
- Truth Social saw a surge of downloads in response to the FBI’s execution of a search warrant at Mar-a-Lago earlier this month.
- Trump has nearly 4 million followers on the app, compared to the roughly 88 million he had on Twitter prior to being banned last year.
What we're watching: Truth Social is not yet available on Android operating systems, which means that around 44% of smartphone users in the U.S. can't download it.