Truth Social's Problems Just Got Worse

Former President Donald Trump's social media platform, Truth Social, has lost more than $31.5 million since its launch in early 2022, according to an Securities and Exchange Commission (SEC) filing.

Digital World Acquisition Corp. (DWAC), a special-purpose acquisition company planning to merge with the owner of Truth Social, Trump Media & Technology Group (TMTG), disclosed in a SEC filing that in 2022 Truth Social recorded an operating loss of $23 million, with net sales of $1.4 million. In the first half of 2023, it recorded an operating loss of $7.6 million, with net sales of $2.3 million.

Since start of operations on February 8, 2021, until June 30, 2023, TMTG recorded a total net loss of $31.5 million, the filing shows.

Since its launch until the end of 2021, TMTG recorded a net loss of $59 million, but in 2022 it recorded a net profit of $50.5 million, when it got a $75 million boost from a "change in fair value of derivative liabilities." In the year to June 30, 2023, TMTG recorded a net loss of nearly $23 million.

The filing warned that if DWAC doesn't complete its long delayed planned merger with TMTG that the company operating Trump's social media app may not survive.

TMTG said it would be merging with DWAC in October 2021, but the transaction met several delays. TMTG said the deal could see its value on the stock market potentially reach $1.7 billion. In October 2023, DWAC said it was returning hundreds of millions of dollars to investors after the two companies missed a September 2022 deadline to complete the deal.

TMTG and DWAC are only committed to the deal until December 31, 2023, with the filing expressing concerns about TMTG's finances and ability to complete the merger.

"As of June 30, 2023, and December 31, 2022, management has substantial doubt that TMTG will have sufficient funds to meet its liabilities as they fall due, including liabilities related to promissory notes previously issued by TMTG," the DWAC filing states.

"TMTG believes that it may be difficult to raise additional funds through traditional financing sources in the absence of material progress toward completing its merger with Digital World."

Truth Social said in a statement: "Unsurprisingly, the Fake News is defaming Truth Social, reporting utterly false information, and ignoring that yesterday's filing was a crucial milestone toward completing our proposed merger."

Truth Social was launched in February 2022 as an alternative to Twitter, now called X, after Trump was banned from the platform and other social media sites in the wake of the January 6 attack on the Capitol.

More than 18 months later, Truth Social is primarily known as the only app that Trump frequently posts on, often sharing dozens of daily updates.

In its filing, DWAC noted that the future of TMTG is almost solely reliant on Trump continuing to use Truth Social.

"If Truth Social fails to develop and maintain followers or a sufficient audience, if adverse trends develop in the social media platforms generally, or if President Trump were to cease to be able to devote substantial time to Truth Social, TMTG's business would be adversely affected."

Following Elon Musk's $44 billion takeover of Twitter in October 2022, he changed its name to X. Trump's account was reinstated the following November. For several months, Trump didn't return to posting on X and remained on Truth Social.

In August 2023, Trump sent his first post on X for more than two and a half years as he shared his historic mugshot taken at the Fulton County Jail after he was charged in Georgia over alleged criminal attempts to overturn the 2020 election results.

Trump posted the mugshot on X along with the caption, "ELECTION INTERFERENCE. NEVER SURRENDER," and a link to a fundraising page on his website.

Trump has continually stated that he has no intention of returning to X full-time.

The former president previously had an exclusivity agreement with Truth Social that meant he must share all his social-media communications on the platform first and "may not make the same post on another social media site for 6 hours," SEC filings showed. However, the deal expired in June 2023.

The difficult merger is not the only issue that has plagued Truth Social.

In July 2023, the SEC found that DWAC had misled investors and the SEC by failing to disclose that it was planning on buying TMTG before it had raised $300 million in IPO funds, and it was fined $18 million.

DWAC also removed its former CEO Patrick Orlando as the head of the company in March, with another former board member, Bruce Garelick, arrested in June on suspicion of insider trading.

Update 11/14/23, 11:29 a.m. ET: This article was updated with a statement from Truth Social.

Correction 11/21/23 6:05 a.m. ET: The operating loss and total net profit and loss figures have been updated.