Understanding Papa Don’s New Pump and Dump 8-K

LAS VEGAS, NEVADA - JANUARY 27: Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas on January 27, 2024 in Las Vegas, Nevada... LAS VEGAS, NEVADA - JANUARY 27: Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas on January 27, 2024 in Las Vegas, Nevada. Trump is campaigning in Nevada ahead of the state’s Republican presidential caucuses on February 8. (Photo by David Becker/Getty Images) MORE LESS
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I mentioned last week that Truth Social — Trump’s social network — only had a bit more revenue than TPM. And needless to say, TPM doesn’t have a multi-billion dollar stock valuation. (If anyone disagrees on this point, contact me.) Today the company released its first 8-K, basically one of the many SEC-mandated disclosures for public companies in which lying means committing a crime. There’s a bit more there on the inflows and outflows. TS brought in about $4.1 million last year and spent $58 million. So that means that TS had about 30% more revenue than TPM and roughly 20 times the expenses. Not great! There’s some other interesting details, like the fact that $39 million of that $58 million went to interest payments. Go figure.

These data points are pretty good evidence that this company is a joke. And they make for good fun. But it’s not proof. A social network in its early stages can be bleeding lots of money and still be legitimately worth a ton of money. This isn’t just hypothetical. Facebook had already become a force of nature before Mark Zuckerberg turned his attention to monetizing the engine of value he created. So there was a time when Facebook was also spending way more money than it made and investors were dying to buy in. Those who did made tons of money.

So the revenue and expenses aren’t the proof. But the proof is there.

In the 8-K, if you go down to the fourth paragraph under Overview, and then later in the section on Key Operating Metrics, you find this sentence (and others) …

At this juncture in its development, TMTG believes that adhering to traditional key performance indicators, such as signups, average revenue per user, ad impressions and pricing, or active user accounts including monthly and daily active users, could potentially divert its focus from strategic evaluation with respect to the progress and growth of its business.

A bit later it notes that not only will it not rely on these metrics but that it may cost too much to collect or report them …

TMTG may find it challenging or cost-prohibitive to implement such effective controls and procedures and may never collect, monitor, or report any or certain key operating metrics.

To sum it all up we get this …

TMTG does not currently, and may never, collect, monitor or report certain key operating metrics used by companies in similar industries

In other words, Truth Social doesn’t collect or report the key value metrics that the value of a social network is based on. And it probably never will.

With ad impressions and revenue per user that might make sense. Those are monetization metrics. It’s the last part: “active user accounts including monthly and daily active users.” Later on it says that it may never release these old fashioned metrics. What this means is that they are not going to release any information about how many people use Truth Social, how often they use it or how they use it. Those numbers are the essential metrics for how any social application or platform is valued. There’s no other way to put it. There are various other metrics that an over-emphasis on at the beginning could “divert” you from growing the business. But true growth and value, the things you don’t want to be diverted from, are those user metrics — i.e., the ones Truth Social is never going to release.

So the point is that it’s quite possible Truth Social could be losing money and still worth a ton. In fact, if you’re in your growth phase your VC backers are going to want to see that you’re losing money. If you’re not you’re almost certainly not investing enough in growing. But if that was what was happening they would be pointing to evidence of building a robust user base and one in which the user base showed strong signs of organic growth based on the unique characteristics, virality and popularity of the platform. Think of Mark Zuckberg in the mid-aughts riding the tiger of explosive network/platform growth and focusing on that rather than near-term monetization. Truth Social is saying it won’t be releasing any of that data.

The best case for this fairly absurd reasoning is that Truth Social is basically just at the prospectus stage. They’ve got a killer plan and they just haven’t executed it yet. But of course the platform debuted two years ago and has had totally crazy levels of publicity from the start.

This 8-K tells you pretty clearly that this company is worthless. Or rather the only argument for its value is Donald Trump’s say-so.

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