Trump’s Truth Social Platform could struggle to survive without new money

Former President Donald J. Trump’s social media company is failing and is in danger of going bankrupt if it does not find new funding quickly.

In a regulatory filing this week, accountants at Trump Media & Technology Group expressed doubts about the company’s ability to continue as a going concern without new financing. The filing also made clear that Trump Media urgently needs to complete its long-delayed merger with a cash-rich shell company so it can tap $300 million in cash, especially if its flagship online platform, Truth Social, has any chance of surviving.

The document, which provides the first detailed look at Trump Media’s finances, was filed with regulators as part of the company’s ongoing deal with Digital World Acquisition Corporation, the publicly traded shell company it plans to merge with in 2021.

If the deal goes through, Trump Media could be valued at $1 billion, based on Digital World’s share price of $16.60. Still, the rich valuation is no guarantee that the company, which is largely dependent on ad revenue from Truth Social — and Truth Social itself — will be a viable business. Trump Media was short on cash at the end of June and has used up most of the $37 million in private funding it has raised since 2021, according to the filing.

“Unlike the relentless mainstream media campaign spreading false information about Truth Social, we have given millions of Americans their voice back using technology operated at a fraction of the cost of Big Tech platforms,” Shannon Devine, a spokeswoman for Truth Social, said in a statement. Ms. Devine added that “Truth Social continues to make progress toward the completion of the merger, which we believe will enable significant new ventures for the company.”

Since its inception, Truth Social has been a personal megaphone for Mr. Trump, who regularly uses the platform to attack his critics as he runs for president again and faces a series of criminal and civil lawsuits. The platform is popular with some of its most ardent supporters. But every day, much of the platform’s advertising comes from weight loss products, gold coins and “natural cures” for a variety of medical conditions.

According to the documents, Trump Media brought in just $2.3 million in advertising revenue in the first six months of this year.

“Truth Social clearly doesn’t survive on advertising dollars,” said Shannon McGregor, a professor of journalism and media at the University of North Carolina who has studied social media platforms. “And the ads being sold are not robust or sustainable.”

The former president’s platform of choice remains a relative minnow in the social media universe. According to data provider Sensor Tower, the Truth Social app has been downloaded three million times this year. By comparison, Elon Musk’s X, formerly known as Twitter, has been downloaded 144 million times and Meta’s Threads has been downloaded 171 million times in the nearly five months since its debut.

According to Sensor Tower, Truth Social has been downloaded a total of seven million times since its launch in early 2022.

Mr. Trump has 6.5 million followers on Truth Social, up from the 87 million he had on Twitter when he was banned from posting on the platform following the January 6, 2021 attack on the Capitol. Mr. Musk said, After buying Twitter, Mr. Trump returned to the platform, but the former president has only posted one message on X.

Ms McGregor said other social media platforms have tried to broaden their audience reach by striking deals with media personalities and influencers who bring with them a ready-made group of followers.

If the merger is completed, Trump Media would have the cash on hand to retain the services of conservative media influencers. But Ms. McGregor said some people may be reluctant to join a platform so identified with Mr. Trump, whose political future remained uncertain.

“What is the future vision for a platform that is built as a one-person microphone,” she said, is the obvious question for any social media influencer thinking about joining Truth Social.

The glimmer of good news for Mr. Trump is that the filing of the updated merger document this week is an indication that the Digital World deal is moving forward after being held up for nearly two years due to a regulatory investigation.

The filing of a revised prospectus was among the requirements Digital World agreed to as part of an $18 million regulatory settlement it reached with the Securities and Exchange Commission this summer. The settlement resolved an investigation into an allegation that Digital World ignored securities rules for special purpose acquisition companies by entering into early merger talks with Trump Media before the IPO.

Trump Media, in a post on Truth Social, called the filing of the revised merger document “an important milestone toward the completion of our merger.”

The push to complete the merger comes as Trump’s New York real estate business is threatened by Attorney General Letitia James’ civil fraud case against the former president, his adult sons and their family business. In September, a New York judge considering the challenge ruled that Mr. Trump had committed fraud by inflating the value of his real estate and depriving him of control of some of his signature properties.

In recent weeks, the same judge has heard testimony from witnesses — including Mr. Trump — to determine what kind of ultimate punishment should be imposed.

With the future of some of his real estate operations on shaky ground, Trump Media has suddenly become a more important part of the former president’s business empire and calculating his personal wealth. When the merger is completed, Mr. Trump, as chairman, will become Trump Media’s largest shareholder.

The company’s potential post-merger valuation of $1 billion stands in stark contrast to the roughly $10 billion price tag investors placed on the deal shortly after it was announced in October 2021. Still, it’s significantly higher than the $5 million to $25 million valuation that Mr. Trump had put Trump Media on a financial disclosure form this year.