When
I first
wrote about
Digital
World
Acquisition
Corp.
in
January
2022,
its
business
operations
were
merely
an
idea.
To
be
sure,
DWAC
existed.
It
was
a special-purpose
acquisition
company, or
SPAC,
established
for
the
purpose
of
buying
another
firm.
DWAC’s
value
consisted
of
its
commitment
to
buy
the
privately-held
Trump
Media
&
Technology
Group,
which
had
yet
to
offer
a
product.
I
researched
DWAC’s
stock
conventionally,
evaluating
four
scenarios
for
Trump
Media’s
business
possibilities,
ranging
from
bearish
to
strongly
bullish.
The
upshot:
because
the
ex-president
would
receive
majority
ownership
when
the
transaction
was
completed,
retail
shareholders
would
be
greatly
diluted.
They
would
lose
money
unless
the
company’s
value
exceeded
$10
billion
(£7.6
billion).
The
responses
to
that
column
showed
I
had
misread
the
situation.
The
comments
were
entirely
motivated
by
politics.
Not
a
single
reader
addressed
my
numbers.
In
doing
the
fundamental
analysis,
I
had
whistled
into
a
hurricane.
Stage
#2:
Emerging
Growth
One
month
after
my
article
ran,
Trump
Media
debuted
its
social
media
platform:
Truth
Social.
Although
the
launch
attracted
far
more
attention
than
is
customary
with
new
businesses,
its
media
reception
was
similar.
Trump
Media’s
public
relations
department
crowed
about
its
initial
success.
Some
outlets
dutifully
republished
the
company’s
releases,
while
others
were
sceptical,
presenting
counterevidence.
In
other
words,
the
business
press
behaved
as
usual.
Although
the
business
had
yet
to
report
results,
DWAC
investors
became
wary.
As
is
often
the
case
with
concept
stocks –
or
with
most
other
things,
come
to
think
of
it –
the
anticipation
trumped
the
reality.
Closing
at
$92.90
the
day
after
Truth
Social’s
inception,
DWAC’s
stock
began
a
long,
painful
slide.
Eighteen
months
later,
its
price
bottomed
at
$12.46,
making
for
an
87%
loss.
Ouch!
Contributing
to
the
stock’s
problems
were
ongoing
Securities
&
Exchange
Commission
(SEC)
investigations,
which
continually
delayed
the
acquisition.
Originally
scheduled
for
September
2022,
the
purchase
date
was
initially
postponed
to
June
2023,
and
then
pushed
back
again.
Management
was
also
forced
to
restate
its
financial
statements,
as
the
SEC
determined
several
of
its
filings
had
been
materially
in
error.
Stage
#3:
Hibernation
By
summer
2023,
the
bloom
was
thoroughly
off
the
rose.
Not
only
were
market
research
sites
reporting
low
adoption
rates
for
Truth
Social,
but
its
business
model
had
lost
favour.
Elon
Musk’s
purchase
of
Twitter
had
highlighted
the
industry’s
woes.
Because
few
users
will
pay
for
social
media
services,
suppliers
rely
upon
advertising
revenue –
and
advertisers
have
fled
sites
with
political
controversies.
Finally,
SPACs
were
in
disrepute,
as
most
of
their
stocks
had
performed
poorly.
Read
more
from
John
Rekenthaler:
Why
SPACs
Are
a
Racket
In
short,
DWAC
looked
to
be
dead
in
the
water.
Its
acquisition
had
been
deferred
and
its
executives
rebuked.
Meanwhile,
the
company
that
it
planned
to
buy
was
struggling.
Under
such
conditions,
SPAC
investors
typically
veto
the
scheduled
deal,
thereby
forcing
the
organisation
to
return
the
par
value
of
their
shares.
However,
as
I
learned
after
publishing
my
2022
column,
Donald
Trump’s
presence
changes
the
ordinary
rules.
After
all,
DWAC
was
not
buying any business;
it
was
purchasing
one
that
would
be
owned,
branded,
and
promoted
by
the
ex-president.
Big
difference!
Millions
of
potential
investors
who
otherwise
would
not
have
bothered
with
DWAC
wished
to
care.
They
just
needed
a
reason.
Stage
#4:
Rejuvenation
They
found
it
in
January
of
this
year,
when
the
oft-postponed
merger
finally
appeared
on
the
horizon.
By
then,
Trump
Media’s
financial
results
had
been
released,
as
part
of
DWAC’s
filing
process,
and
they
were
breathtakingly
bad.
Not
only
had
Truth
Social received
only
$2.3
million in
revenue
during
the
first
six
months
of
2023,
but business
had
been
flat during
the
following
quarter.
To
greatly
understate
the
matter,
those
results
failed
to
meet
the
company’s
projections.
In
October
2021,
Trump
Media
had
provided
its
initial financial
forecast.
After
posting
negligible
revenue
in
2022,
the
presentation
stated,
Trump
Media
would
post
$144
million
in
sales
in
2023,
followed
by
$835
million
this
year.
Not
so
much!
(By
now,
most
of
Trump
Media’s
revenues
were
projected
to
come
not
from
its
social
media
site,
but
instead
from
an
entertainment
streaming
service
called
TMTG+.
However,
the
latter
has
never
been
created.)
None
of
which,
of
course,
has
mattered
to
investors.
The
newly
public
Trump
Media
&
Technology
Group
(DJT),
which
consists
of
the
merger
of
DWAC’s
$300
million
cash
position
and
the
Truth
Social
platform,
is
worth
a
great
deal.
How
much,
exactly,
is
unclear. The
Wall
Street
Journal’s
James
Mackintosh
valiantly tackled
the
math,
which
is
tricky
because
the
level
of
shareholder
dilution
depends
upon
several
circumstances,
but
his
appraisal
did
not
match
the
company’s.
Since
Trump
Media’s
representatives
did
not
respond
to
his
questions,
the
issue
remains
unresolved.
Stage
#5:
Cryptocurrency
Many
observers
have
called
Trump
Media
a
meme
stock,
but
the
label
does
not
fit.
Meme
stocks
consist
either
of
established
firms
that
have
stagnated,
such
as
2021’s
stars,
or
they
are
growth
stories,
as
with
this
year’s
heroes.
In
either
case,
meme
stock
investors
care
about
their
companies’
business
operations.
When
I wrote in
January
2021
about
GameStop
(GME),
several
shareholders
quarreled
with
my
assessment
of
the
company’s
prospects.
But
business
results
are
not
the
issue
with
Trump
Media.
If
they
were,
the
DWAC
transaction
never
would
have
been
consummated,
and
DJT
stock
never
would
have
come
to
market.
Trump
Media
is
instead
a
cryptocurrency.
As
with
bitcoin,
people
buy
Trump
Media
not
for
future
cash
flows
but
because:
1)
they
expect
its
price
to
rise,
and;
2)
they
feel
an
affiliation
for
the
asset.
Bitcoin
owners
are
members
of
a
club.
So,
too,
are
Trump
Media
investors,
to
an
even
greater
degree.
For
them,
DJT
shares
represent
a
currency
by
which
they
can
express
their
beliefs
and
commitment.
Which
is
why
I
will
make
no
forecasts
about
Trump
Media’s
stock
price.
In
January
2022,
I
offered
my
view
on
DWAC
–
correctly,
it
turned
out.
I
will
not
make
a
second
attempt
as
the
normal
investment
rules
no
longer
apply.
Predicting
DJT’s
fortunes
is
like
predicting
the
direction
of
bitcoin.
Others
may
try,
but
not
me.
Update
When
this
column
was
originally
published,
I
stated
that
Trump
Media
&
Technology
Group’s DJT annual
revenue
had
“plateaued”,
which
is
terrible
for
a
company
that
was
only
in
its
second
year
of
operations.
As
it
turns
out,
I
was
too
kind.
On
1
April,
SEC
filings
revealed
that,
after
treading
water
in
the
third
quarter
of
2023,
Trump
Media’s
revenue
dropped
sharply
in
the
fourth
quarter.
During
the
first
nine
months
of
the
year,
the
company’s
sales
were
an
annualised
$4.5
million.
In
the
final
quarter,
they
sunk
to
an
annualised
$3
million.
The
market’s
reaction
has
cast
doubt
on
my
claim
that
Trump
Media
is
a
form
of
cryptocurrency,
owned
by
people
who
do
not
expect
the
business
to
ever
generate
cash.
Per
that
logic,
Trump
Media’s
operational
results
are
beside
the
point
because
everybody
realises
that
the
company
lacks
meaningful
business
prospects.
Yet
the
stock
has
lost
25%
of
its
value
since
the
filing
was
released,
suggesting
Trump
Media
shareholders
do,
in
fact,
care
about
the
business
results.
John
Rekenthaler
is
vice
president
of
research
at
Morningstar
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