Truth Social On the Brink of Collapse as Losses Mount
By April Fowell
Supporters of Truth Social characterized the social network when it first started in 2022 as a conservative-friendly substitute for Big Tech platforms, drawing advertisers keen to woo the millions of fans of former president Donald Trump.
However, according to a recent regulatory filing, Trump Media & Technology Group, the company that owns Truth Social, has only made $2.3 million in sales through June of this year, losing ten times that amount.
(Photo : by Scott Eisen/Getty Images)
The accountants for Trump Media & Technology Group have issued a caution in the report, stating that they have "substantial doubt about the company's ability to continue as a going concern.”
The accountants for Trump Media & Technology Group have issued a caution in the report, stating that they have "substantial doubt about the company's ability to continue as a going concern."
Financial Disclosures Raise Concerns
In a file released on Monday, Digital World Acquisition Corp. (DWAC), a purported special-purpose acquisition company (SPAC) established to amalgamate with Trump's enterprise, disclosed the financial particulars of Trump Media & Technology Group.
SPACs enable a business to sell shares to the public more rapidly than through a conventional IPO, which necessitates additional regulatory procedures.
The submission, according to DWAC CEO Eric Swider's statement on Monday, represents "a crucial milestone in our journey towards the potential merger with TMTG".
The wording used by Trump Media's accountants is referred to as a "going concern" warning, according to S&P Global, which means an accounting firm thinks a company does not have enough cash on hand to pay its debts and could fail within the next year.
Granted, the warning is based on a single point in time, and it is plausible that Trump Media's impending acquisition of DWAC will supply the capital required for the combined business to fulfill its commitments and spur expansion.
Concerns Rise Over Cash Burn, Modest Sales Growth, and Liabilities
According to the petition, Trump, who is chairman of Trump Media and has equity in the company, has committed to posting on Truth Social before any rival social media platform.
The financial picture that is revealed by the filing shows a business that is losing more and more money yet seeing only modest growth in sales.
According to the statement, Trump Media generated $2.3 million in sales during the first half of 2023, as opposed to nil revenue during the same time the previous year.
According to a report, Trump Media is burning through cash as a result of its rising losses; at the end of June, it had $2.4 million in cash, down from $19 million the previous year. The business achieved a $50.5 million net profit in 2022 while reporting an operational loss of $23.3 million due to a shift in the value of its convertible notes.
The statement also included a warning that Trump Media's own management is concerned about the firm's capacity to pay for its liabilities and to satisfy its responsibilities to lenders. The company is now discussing its debts with lenders.
"During the 12 months following the signing of these financial statements, management has substantial doubt that the company will have sufficient funds to meet its liabilities as they fall due, including liabilities related to promissory notes previously issued by the company," according to the filing.