Description
Truth Social is a proposed social media platform by Trump Media & Technology Group (TMTG). In mid-December 2021, its implied valuation was $10 billion, though it had "no known revenue or product", according to CNN. U.S. Representative Devin Nunes resigned from Congress to become CEO of TMTG.
History
On October 20, 2021, Trump Media & Technology Group issued a press release which announced the platform would have its public launch in "the first quarter of 2022." It was slated to enter limited beta for iOS in Apple's App Store in November 2021, and though it did not meet this schedule for its beta testing, Trump claimed in December 2021 that "invited guests" were already using the beta site.
Hours after the press release, a person identifying themselves as a part of the hacker collective Anonymous used Shodan to discover domains related to the company, eventually locating what appeared to be a publicly-accessible mobile beta of the website. The URL, which permitted users to sign up and use the platform, was leaked across social media. Users began trolling on the site, creating parody accounts, and posting humorous and comedic content. Users were able to sign up with usernames of high-profile individuals including Trump, Mike Pence, and Jack Dorsey. The link was later taken offline.
Truth Social is based on Mastodon, free and open-source software that is released under the AGPLv3 license. AGPLv3 requires any derivative source code to be publicly available. On October 21, 2021, the Software Freedom Conservancy group stated that they suspected Truth Social had violated Mastodon's license by not offering its source code to all users. The Mastodon developers then formally requested that Truth Social comply with the terms of the software license. On November 12, 2021, Truth Social published its source code as a ZIP file on its website.
U.S. Representative Devin Nunes resigned from Congress effective January 1, 2022 to become CEO of Truth Social's parent company, TMTG.
Company and finances
On October 20, 2021, the special-purpose acquisition company (SPAC) Digital World Acquisition Corp (DWAC) announced a merger with Trump Media & Technology Group. The merger valued the Trump Media & Technology Group at $875 million, as of October 21, 2021. On October 21, 2021, shares of DWAC rose by 400%, from $10 to $45.50, following the announcement of Truth Social. The next day, the stock price increased by an additional factor of two. Trading of the company's stock was halted multiple times due to its volatility. The run-up in stock price was considered similar to the GameStop short squeeze earlier that year.
SPACs are structured such that they first sell shares to the public and then raise funds from investors to later acquire a private company, the identity of which cannot be known by the SPAC or its investors in advance. Some investors were surprised to learn that their investment money was being used to finance a Trump company. SPACs have long had questionable reputations because they can give companies access to public markets that would otherwise be difficult, due to a poor or nonexistent track record.
The New York Times reported days after the TMTG deal was announced that the founder of the Digital World SPAC, Miami banker Patrick Orlando, had been discussing the deal with Trump by March. The formation of the SPAC was announced in May and it was taken public in September. The Times reported that by summer 2021 people affiliated with TMTG were telling Wall Street investors that the company was nearing a deal to merge with a SPAC. Digital World was not specifically named, but if it was the SPAC in question this may have skirted securities laws and stock exchange rules, since SPACs are not allowed to have a target company in mind prior to going public. Trump and Orlando had initially discussed a deal through another of Orlando's SPACs that was already publicly-traded, but it was deemed too small for the Trump deal. Some bankers told the Times that because the deal discussions began when the first SPAC was being considered, which would be proper, an argument could be made that discussions did not occur after the Digital World SPAC was formed, which would be improper. Digital World stated in three prospectuses that it had not had "any substantive discussions, directly or indirectly, with any business combination target."
The company applied for trademarks on the name "Truth Social" and other terms including "truthing", "retruth", and "post a truth".
In December 2021, TMTG said it had raised $1 billion in private investment in public equity (PIPE) funding. The investors are unidentified. The Financial Times reported the expected proceeds of the PIPE and SPAC funding to TTMG would be $1.25 billion. Based on Digital World stock prices on December 3, 2021, the venture was valued at almost $4 billion. A week later, the implicit valuation had risen to $10 billion.
Digital World disclosed in a December 2021 regulatory filing that the Securities and Exchange Commission and the Financial Industry Regulatory Authority had weeks earlier asked it for information about stock trading and communications with TMTG prior to their deal being announced.
