Trump SPAC Deal: Taking on Twitter, Disney, CNN & Big Tech

Donald Trump Returns to the Tech Landscape

Following a period of relative quiet concerning former President Donald Trump within TechCrunch’s coverage, recent developments have brought him back into focus.

Yesterday brought the announcement that Trump Media & Technology Group, an organization established to compete with established technology and media giants, intends to become a publicly traded company through a merger with a Special Purpose Acquisition Company (SPAC).

Digital World Acquisition Corp., the SPAC involved, has successfully secured $287.5 million in funding.

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The combination of Trump Media & Technology Group – referred to as TMTG henceforth – and Digital World is projected to have “an initial enterprise value of $875 Million.”

This figure could increase to $825 million further, contingent upon the stock’s performance following the completion of the business combination.

According to the official announcement regarding the transaction, “Trump Media & Technology Group’s initial growth will be financed by the funds currently held in trust by DWAC.”

This funding strategy is noteworthy.

It appears the former president has determined that directly financing the company bearing his name would be cost-prohibitive, leading to the utilization of a SPAC to secure the necessary capital.

Independent of personal opinions regarding this approach, the significance of this news cannot be overlooked.

The company’s name, “Media & Technology,” suggests substantial ambitions, though concrete evidence of progress remains limited.

A financial injection of a quarter of a billion dollars is expected to facilitate these endeavors.

We will first examine the financial details of the deal.

Then, we will provide an overview of TMTG’s planned developments.

Is a Penalty Being Applied?

The evidence suggests a definitive affirmative response.

Returning to the matter at hand: Digital World Acquisition Corp. initially offered shares at $10 each, consistent with the typical pricing structure for special purpose acquisition companies (SPACs). The company features two distinct share classes available for trading, namely units ($DWACU) – comprising a Class A share and half of a warrant – and Class A shares ($DWAC) themselves.

Both share types experienced significant gains following the announcement of the merger. Pre-market activity showed units of Digital World increasing by approximately 66% to $16.86, while Class A shares rose by a more contained 48% to $14.79.

Under the assumption of zero redemptions – a substantial presumption given the current trend of increasing SPAC redemptions – TMTG is projected to possess roughly $293 million in capital from the blank-check company to facilitate its development. However, the crucial question remains: develop what?

As of this writing, a standard SPAC investor deck containing revenue projections and similar data was not located by The Exchange. Nevertheless, a presentation originating from TMTG itself was obtained and provides valuable insight. Let's proceed with an examination of its contents.

Examining the TMTG Presentation

The TMTG presentation outlines a vision centered around a media and technology platform. It aims to challenge established social media giants by offering an alternative focused on free speech principles.

Key components of the proposed platform include a social media network, news and video on-demand services, and potentially a suite of related offerings.

The presentation highlights a projected user base of 75 million by 2026. This ambitious target relies heavily on attracting users dissatisfied with existing platforms and successfully cultivating a loyal community.

Projected Financials

TMTG anticipates substantial revenue growth over the next several years. Their projections suggest revenues reaching $1.1 billion by 2026.

This revenue is expected to be generated through a combination of advertising, subscription fees, and potentially other revenue streams related to content creation and distribution.

However, it’s important to note that these are projections and are subject to significant uncertainty. Achieving these figures will require successful execution of their business plan and favorable market conditions.

Competition and Challenges

The social media landscape is intensely competitive, dominated by established players like Facebook, Twitter, and TikTok. TMTG faces a considerable challenge in gaining market share.

Furthermore, the company's focus on free speech has raised concerns about potential content moderation issues and the possibility of attracting extremist groups. Navigating these challenges will be critical to its long-term success.

Successfully competing will necessitate a differentiated product offering and a robust strategy for user acquisition and retention.

Reality vs. Illusion: Examining TMTG's Ambitions

The core business objectives of TMTG are demonstrably focused on challenging established industry leaders. These include prominent social media platforms such as Twitter and Facebook, alongside major technology corporations like Amazon, Microsoft, Google, and Stripe.

Furthermore, the group intends to compete with leading content streaming services like Netflix and Disney, as well as major news organizations including CNN and audio-focused entities such as iHeartRadio.

As outlined in the company’s own presentation, tackling public cloud and fintech infrastructure giants is acknowledged as a “long-term” endeavor, not an immediate priority.

However, the initial focus appears to be on launching a social network – Truth Social – a streaming service – TMTG+ – and a news platform – TMTG News.

The company expresses significant optimism regarding these ventures. The following graphic, presented on page 12 of the investor presentation, illustrates their projected scope:

This demonstrates the breadth of their intended market disruption.

Specifically, Truth Social is designed as a competitor to Twitter. The company’s stated goals for its development are as follows:

Early previews of the application reveal that it is still under development, even including placeholder “lorem ipsum” text. Initial access has been limited, with some users gaining entry through alternative means.

TMTG is currently encouraging users to pre-save the application on the iOS app store, which can be found here. The service is governed by a set of rules, including prohibitions against:

• Advertising or offering goods and services on the platform.
• Harassing or intimidating employees or agents involved in providing the service.
• Actions that could damage the reputation of TMTG or the platform itself.

Access to the Truth Social network is not guaranteed, as the platform reserves the right to deny access to anyone, for any reason. This mirrors policies employed by the platforms TMTG seeks to challenge, a notable irony.

TMTG+ is envisioned as an on-demand streaming service offering news, entertainment, documentaries, and sports programming. The company asserts that there is a demand for “non-woke” entertainment, which TMTG+ aims to fulfill.

The specifics of the TMTG News product remain largely undefined, as do the strategies for competing with established cloud and fintech providers. However, the company possesses nearly $300 million in funding, offering a potential, albeit limited, opportunity for development.

It is difficult to overstate the ambition of this undertaking. The former U.S. president is leveraging a special-purpose acquisition company (SPAC) to fund a project largely self-funded, with the goal of challenging companies with a combined value in the trillions of dollars.

The available capital is demonstrably insufficient. Even ten times the current funding would likely prove inadequate. To illustrate this point, Twitter’s operating costs in Q3 2021 reached $1.16 billion, while Facebook’s Q2 2021 operating costs exceeded $10 billion. Considering the expenditures of Netflix, Disney, and CNN, the $300 million investment appears comparatively small.

Several key questions remain:

• What impact will SPAC redemptions have on TMTG’s available cash reserves?
• Who will receive the “potential additional earnout of $825 Million in additional shares”?

Should the latter benefit the former president directly, it would likely generate significant controversy.

Predictions regarding the success of this venture are varied. It is anticipated to underperform previous attempts like Air America and Gettr. Further reporting will follow once access to the social network is granted.