Trouble at Truth Social: New filing details laundry list of risks facing Trump – Grid News

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Trouble at Truth Social: New filing details laundry list of risks facing Trump

The future of Truth Social, the social media network backed by former president Donald Trump, is murkier than ever, judging by a new regulatory filing that offers a peek inside the struggling fledgling company.

It includes new details about Truth Social’s financial footing, Trump’s obligations to post on the site and a federal probe of a planned merger with Digital World Acquisition Corp. — a so-called SPAC set up as a vehicle for investors to merge with another company and go public while bypassing an initial public offering.

Digital World filed a long-awaited registration statement, known as an S-4, with the Securities and Exchange Commission on Monday, ahead of the planned merger. Grid combed through the 250-plus-page document for key disclosures about the status of the merger and Truth Social’s future.

The SEC guillotine

“Digital World was in the past, and continues to be, subject to inquiries, exams, pending investigations, or enforcement matters.”

Digital World Acquisition Corp. form S-4 registration statement

Digital World is currently the subject of a number of probes by financial regulators. The company is cooperating with an inquiry by the Financial Industry Regulatory Authority (FINRA), the authority the financial industry uses to regulate itself. FINRA is reviewing trades that Digital World made before it announced its merger plans. The company is also under investigation by the SEC. SPACs like Digital World are not supposed to go public with an acquisition already lined up, but the SEC is investigating whether Digital World was already in talks with Trump Media and Technology Group (TMTG) when they went public in September of 2021. Digital World failed to disclose that Chief Executive Patrick Orlando’s other SPAC, Benessere Capital Acquisition, was in talks to acquire TMTG in the days leading up to Digital World’s IPO.

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The agency has requested documents and issued a subpoena regarding meetings of Digital World’s board of directors, communications around potential targets for it to acquire (including TMTG), payments to advisers and investors, and the appointment of certain officers and directors, among other things.

The company’s SEC filing warns that the SEC may “delay declaring this registration statement effective or disapprove this transaction and issue a stop order or similar order with respect to this registration statement which could materially delay or materially impede the consummation of the Business Combination.”

Essentially, the SEC could still stop the deal.

Trump’s trail of lawsuits

“President Trump is involved in numerous lawsuits and other matters that could damage his reputation, cause him to be distracted from the business or could force him to resign from TMTG’s board of directors. Additionally, TMTG’s business plan relies on President Trump bringing his former social media followers to its platform. In the event any of these, or other events cause his followers to lose interest in his messages, the number of users of TMTG’s platform could decline or not grow as TMTG has assumed.”

Digital World Acquisition Corp. form S-4 registration statement

While it’s hard to imagine Trump die-hards being put off by the litany of accusations and lawsuits against him, the S-4 rates them as a risk and discloses them in expansive detail.

The tally includes congressional investigations and lawsuits brought by two groups of U.S. Capitol police officers over the Jan. 6, 2021, insurrection. It also mentions the NAACP’s lawsuit alleging that Trump violated the Voting Rights Act for putting pressure on election officials to not count votes in the 2020 presidential election, a criminal probe by a Georgia district attorney examining potential election interference and defamation cases brought by a Pennsylvania poll worker and a former employee of Dominion Voting Systems.

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The S-4 then goes on to list cases and investigations relating to sexual misconduct, fraud and racketeering, the removal and destruction of classified documents from the White House, defrauding investors in exchange for secret payments from multiple companies, and assault and battery at the hands of Trump Tower security guards.

The filing recognizes this is not an exhaustive list.

“Although TMTG is not a party to any of the above-referenced matters, TMTG cannot predict what effect, if any, an adverse outcome to such matters, or even their continued existence, may have on President Trump’s personal reputation and TMTG’s business or prospects,” it reads.

Trump’s past business and licensing failures

“A number of companies that were associated with President Trump have filed for bankruptcy. There can be no assurances that TMTG will not also become bankrupt.”

Digital World Acquisition Corp. form S-4 registration statement

“The terms of a license agreement with President Trump is not terminable by TMTG when it may be desirable to TMTG. The license agreement does not require President Trump to use Truth Social in certain circumstances and could require TMTG to make payments to President Trump for content on TMTG+.”

Digital World Acquisition Corp. form S-4 registration statement

The SEC filing mentions that a large number of Trump businesses have gone bankrupt including the former Trump Taj Mahal and Trump’s Castle casinos in Atlantic City, New Jersey, and Trump Hotel Casino and Resorts in Las Vegas, nothing that “there can be no guarantee that TMTG’s performance will exceed the performance of those entities.”

It also lays out how several of Trump’s licensing agreements have failed. These include deals that led to Trump University, which ceased operations amid lawsuits and investigations into its business practices; Trump Vodka; the travel website GoTrump.com; and Trump Steaks, which famously lasted two months. It again notes that “while all of the foregoing were in different businesses than TMTG, there can be no guarantee that TMTG’s performance will exceed the performance of those entities.”

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The non-woke content commitment

“TMTG has placed emphasis on providing streaming services wherein the programming would be “non-woke” and will cancel “cancel culture.” Particularly, President Trump has stated that TMTG will stand up to “cancel culture” and the “self-righteous scolds.” Failure to realize this vision would adversely affect TMTG’s brand and business prospects.”

Digital World Acquisition Corp. form S-4 registration statement

“TMTG has placed emphasis on building a platform for all Americans to freely express themselves through TruthSocial. In particular, President Trump has stated that this is a platform for all who have been censored by Big Tech. Failure to realize this vision would adversely affect TMTG’s brand and business prospects.”

Digital World Acquisition Corp. form S-4 registration statement

When Trump announced his plans for Truth Social, he said he was “stand[ing] up the tyranny of Big Tech.”

Digital World said it will make substantial investments to develop and provide “non-woke” content that cancels “cancel culture.” It’s unclear exactly what that means from a regulatory and legal term, but there is a recognition the investments may not hit their goals. If TMTG fails to maintain its “non-woke” programming, the business may be adversely affected.

It’s unclear if this is the first time “non-woke” has been used in an SEC filing.

The S-4 also is clear that TMTG sees Truth Social as a place for all Americans to freely express themselves, including those who have been censored by Big Tech. It’s unclear how the company will meet these goals, and its promise of hosting content that “cancels cancel culture.” Truth Social cannot host illegal content, and its terms of service bar users from posting sexual language or content, anything that is “false, inaccurate, or misleading” or anything that violates the privacy rights of a third party, which sounds suspiciously like doxxing.

Financial risks

“Since inception, TMTG has continuously sought to develop its business model through the development of its technology as an early stage company. TMTG expects to incur operating losses for the foreseeable future.”

Digital World Acquisition Corp. form S-4 registration statement

“Digital World has not obtained an opinion from an independent investment banking firm or another independent firm, and consequently, you may have no assurance from an independent source that the terms of the Business Combination are fair to the stockholders of Digital World from a financial point of view.”

Digital World Acquisition Corp. form S-4 registration statement

TMTG identifies itself as an early-stage company in a crowded social media environment, admitting it has not fully developed its business plan or management team. It says it “has no way to evaluate the likelihood that its business will be successful” and predicts operating losses for the foreseeable future.


As Grid has reported, right-wing social media companies have failed to reach the scale of their competitors and have scared off some advertisers.

Truth Social’s launch in February came after months of delays. And while 170,000 people downloaded the app the day it launched, only 8,000 a day were doing so by early April.

“There is no operating history upon which to base any assumption as to the likelihood that TMTG will prove successful,” reads the S-4.

Digital World also says it has no independent way to assure the terms of the merger are fair to its stockholders; those with holdings in the firm will have to rely on the judgment of the Digital World board.

“The lack of third-party valuation or fairness opinion may also lead an increased number of stockholders to vote against the Business Combination or demand redemption of their shares, which could potentially impact our ability to consummate the Business Combination,” continues the S-4.

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Trump’s financial gain

“President Trump has significant influence over key decision making as a result of his control of a significant portion of TMTG’s voting stock.”

Digital World Acquisition Corp. form S-4 registration statement

“The terms of a license agreement with President Trump is not terminable by TMTG when it may be desirable to TMTG. The license agreement does not require President Trump to use Truth Social in certain circumstances and could require TMTG to make payments to President Trump for content on TMTG+.”

Digital World Acquisition Corp. form S-4 registration statement

Trump, who is TMTG’s chairman, will receive 73.3 million shares of common stock, representing 57.8 percent of the merged company’s voting power. His equity stake would amount to more than $3.8 billion if the merger took place today. As a controlling stockholder though, he would be entitled to vote in his own interests, which may not always be the same as those of the company or other shareholders.

Trump would also benefit financially from his licensing agreement with TMTG. The filing says that the agreement is not breached if Trump engages in personal or political conduct considered “offensive, dishonest, illegal, immoral, or unethical, or otherwise harmful to TMTG’s brand or reputation.”

He is not allowed to post anything to other social media platforms for six hours after posting on Truth Social, unless it’s related to political messaging and political fundraising, at which point he is free to do at any time. That loophole could be large enough to accommodate nearly anything Trump posts.

Trump also could be paid for posting content to TMTG+, the company’s video-on-demand service.

Thanks to Lillian Barkley for copy editing this article.

  • Benjamin Powers
    Benjamin Powers

    Technology Reporter

    Benjamin Powers is a technology reporter for Grid where he explores the interconnection of technology and privacy within major stories.