Oct 11, 2022 - Economy

Truth Social SPAC again delays shareholder vote

Illustration of the Trump Social app askew and with a question mark

Illustration: Sarah Grillo/Axios

Donald Trump's social media startup, Truth Social, is facing a perilous future.

Driving the news: A former company executive reportedly filed a whistleblower complaint with federal securities regulators in August, and it remains unable to access hundreds of millions of dollars tied to a prospective merger with a blank check acquisition company.

  • The company doesn't currently generate any revenue, and has said it only has enough cash to last through next spring.
  • Shareholders of the blank check company, Digital World Acquisition Corp., have been asked to approve a one-year extension to their merger. The original vote already fell short, and DWAC's sponsor continues to beg for votes ahead of a new November 3 deadline.
  • Truth Social has laid out aggressive growth targets — 56 million users by 2024 and 81 million by 2026 — that will be hard to hit without access to capital tied up in DWAC and a related outside investment (called a PIPE) tied to the prospective merger.
Average engagement with Donald Trump's posts on select social media platforms
Data: Kaggle, Trump Twitter Archive, Axios research; Chart: Axios Visuals

The big picture: Truth Social is facing serious financial and legal stress.

  • It failed to pay key vendors and its SPAC is currently under investigation by the SEC for possibly negotiating its merger deal prior to going public, which is illegal if true.
  • William Wilkerson, former senior vice president of operations for Truth Social's parent company, is cooperating with the investigation — including turning over internal business documents — according to a statement made by his attorneys to The Miami Herald.

Yes, but: The app continues to grow modestly, giving Trump a megaphone while he remains de-platformed from most social media sites.

  • An Axios analysis of engagement with his Truth Social posts during Sept. 2022 compared to his Twitter posts during Sept. 2020 finds that while his engagement has decreased significantly, Trump still receives notable attention on Truth Social.
  • He has 4.17 million followers on Truth Social, as of Oct. 11, compared to the roughly 86 million followers he had on Twitter in September 2020.

What to watch: Shares in DWAC have taken a hit in light of Elon Musk's planned purchase of Twitter. Musk has said that he would like to relax content moderation rules and has called Truth Social "essentially a right-wing echo chamber."

  • "You might as well call it Trumpet," he told The Financial Times last week.
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