Former President Donald Trump’s fortune fell from around $3.2 billion (an amount that would have registered last fall in the US) to $2.5 billion today. What is the main reason for this setback? His social media business, which has collapsed
In October 2021, Donald Trump was itching for revenge. Nine months earlier, he had been banned from Twitter, depriving him of his main means of communication with his followers. His solution? Build your own Twitter. Dubbed the Truth Social, it had the potential to increase Trump’s fortune by billions of dollars. As soon as he announced the plan, followers rushed to invest in Truth Social’s special purpose acquisition company, or SPAC.
Shares in SPAC, Digital World Acquisition Corp., went from $10 to $175 in two days, making the deal worth $22 billion, with Trump’s interest at $19 billion.
The hype never lined up with reality. In December 2021, a group of deep-pocketed investors promised to pump $1 billion in cash into the project, but only if they got a special deal. At the time, the shares were trading at $45 on the open market.
But under the deal, new investors were guaranteed a profit as long as the shares stayed above $10. In previously estimating the value of Trump’s stake, Forbes used that $10 a share figure and came up with $730 million.
Truth Social lost popularity
But things have changed. Even the most ardent Trump fans aren’t as excited about Truth Social as they used to be. The Justice Department, the Securities and Exchange Commission and the Financial Regulatory Agency are scrutinizing the project, looking at things like trading activity and communications between the SPAC and Trump’s business.
Meanwhile, the SPAC, which fired its chief executive last month, only has until September 8 to complete the merger. Additionally, Elon Musk bought Twitter in October and immediately revoked the ban on Trump and other right-wing figures. That undermined the argument that the world needed a more conservative version of Twitter.
Today, shares of Trump’s SPAC are 92% below their highs, trading at $14 a share, suggesting the former president’s business is worth $1.2 billion.
That still seems absurdly high. The fundamental problem is that hardly anyone uses Truth Social. Before its launch, an investor pitch suggested the app would attract 81 million users by 2026. Now, more than a year after launch, it is only estimated to have 5 million.
Given that Trump owns about 85% of the business and Twitter is worth about $42 per user, the former president’s stake probably amounts to about $180 million today.
Even that could be too much. It is estimated that Truth Social is adding about 100,000 users per month. If people continue to join at the current rate and assuming no one quits or dies, Truth Social won’t reach its projected 81 million users until 2086.
At that point, Trump would be 140 years old. A more likely outcome.