# Why is the valuation so high for the SPAC merging with Truth Social? **URL:** \ **Category:** Factual Questions\ **Created:** [March 22, 2024, 9:39pm UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226 "2024-03-22T21:39:12Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![sweeteviljesus](https://avatars.discourse-cdn.com/v4/letter/s/898d66/32.png) [@sweeteviljesus](https://boards.straightdope.com/u/sweeteviljesus)\ **Post date:** [March 22, 2024, 9:39pm UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/1 "2024-03-22T21:39:13Z")
Why is the SPAC merging with Truth Social valued at $42/ share when TS loses money hand over fist? Also, what’s the story on Digital World Acquisition Company, the SPAC in question? AIUI, its lifetime has exceeded two years and the company it buys is supposed to be secret. Is that true? Also, does the acquired private company get paid in cash raise in the SPACs IPO, or shares? ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [March 22, 2024, 10:01pm UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/2 "2024-03-22T22:01:49Z")
Insert ‘facebook’ ten years ago and you could ask the same question. There are a lot of high valued tech firms that lose money, on the promise that one day they won’t. Tesla also had crazy valuations when they were losing money, and so did other major tech firms. Tech firms get measured by the promise of their tech, how much ‘lock in’ they have of their audience, and what their growth patterns look like. That said, it seems to me that the value of Truth Social lives and dies with Trump. Once he’s out of the picture (and it has to happen soon enough - he’s approaching 80), who is going to go onto Truth Social? I don’t see any IP worth much, and it doesn’t appear to have any features lacking in other social media. There was a window of opportunity for a social media service that did not engage in the kind of censorship that the others were doing, but Musk closed that by opening up Twitter. So I have no idea what the market looks like for Truth Social, but whatever it is, it’s likely temporary. I wouldn’t invest a nickel. But then, I didn’t invest in Facebook back then either, and if I had I’d be rich. Disclaimer: I’ve never been on Truth Social, so I’m talking as an outsider. It’s entirely possible that we outsiders are missing whatever it is that might make Truth Social valuable. Maybe he’s built up an army of content providers and has a lock on right-wing social media. ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [March 22, 2024, 10:15pm UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/3 "2024-03-22T22:15:23Z")
Looks like this is something of a meme stock situation. The investors in Digital World are mostly individual Trump fans, not institutional investors. Meme stocks don’t typically last for very long since the valuation is based entirely on wishful thinking and everybody behaving irrationally at once. But as they say, the market can stay irrational longer than you can stay solvent. So I wouldn’t suggest shorting them. But the whole thing could easily collapse before Trump gets to cash out. ---
**Author:** ![sweeteviljesus](https://avatars.discourse-cdn.com/v4/letter/s/898d66/32.png) [@sweeteviljesus](https://boards.straightdope.com/u/sweeteviljesus)\ **Post date:** [March 23, 2024, 6:07am UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/4 "2024-03-23T06:07:28Z")
Facebook and Tesla IPO’ed though. I guess like Trump, they were sort of personality cults, but at least one could see why they might be profitable one day. But what about the SPAC part? I know there was a lot of investigation, but I don’t know that it was ever wrapped up. ---
**Author:** ![Princhester](https://avatars.discourse-cdn.com/v4/letter/p/3e96dc/32.png) [@Princhester](https://boards.straightdope.com/u/Princhester)\ **Post date:** [March 23, 2024, 8:08am UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/5 "2024-03-23T08:08:35Z")
> [@sweeteviljesus](#): > > Facebook and Tesla IPO’ed though. I guess like Trump, they were sort of personality cults… Facebook was not and is not a personality cult. It was at the time of its IPO (and now I think) the biggest social networking website, and that is why its IPO did well. I very much doubt that Zuckerberg’s personality was a substantial factor in the IPO’s success. Quite possibly the opposite. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [March 23, 2024, 1:56pm UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/6 "2024-03-23T13:56:58Z")
It’s worth pointing out that the less a stock trades, the more valuations can get wacky. Right now is the pump phase. Folks who are trumpies are buying while nearly nobody is selling. That ramps the price. There’s somebody who is the source for what little free float there is, and that somebody is stage-managing how much is out there to be bought. They hope to position things for the dump phase when they get out and the rubes are left holding suddenly empty bags. They may succeed, they may not. ---
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [March 24, 2024, 11:59am UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/7 "2024-03-24T11:59:56Z")
The stock price in the merging company has dropped 14% since the merger was finalised. > **[Trump says 'I love Truth Social' one day after DWAC stock plunges on social...](https://www.cnbc.com/amp/2024/03/23/trump-says-i-love-truth-social-after-dwac-stock-plunges-.html)** > > Donald Trump faces big civil judgments, but the merger of Digital World Acquisition and his social media company could net him a $3 billion windfall. ---
**Author:** ![sweeteviljesus](https://avatars.discourse-cdn.com/v4/letter/s/898d66/32.png) [@sweeteviljesus](https://boards.straightdope.com/u/sweeteviljesus)\ **Post date:** [March 24, 2024, 2:18pm UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/8 "2024-03-24T14:18:02Z")
Yeah, that’s fair now that I think about it. Tesla, not so much, although now Elon personality gives off more Zuck vibes than Steve Jobs, so going forward his business ventures will have that taint. I do recall FB tanking a bit after IPO, albeit temporarily. ---
**Author:** ![sweeteviljesus](https://avatars.discourse-cdn.com/v4/letter/s/898d66/32.png) [@sweeteviljesus](https://boards.straightdope.com/u/sweeteviljesus)\ **Post date:** [March 24, 2024, 2:20pm UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/9 "2024-03-24T14:20:43Z")
Is there any aspect of this that makes it illegal? Since it’s widely known that Trump has a major equity stake, I don’t know that it could be. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [March 24, 2024, 3:05pm UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/10 "2024-03-24T15:05:18Z")
I don’t have the expertise to answer that question. Securities law is real friendly to people who put enough disclaimers in their paperwork. ---
**Author:** ![md-2000](https://avatars.discourse-cdn.com/v4/letter/m/9d8465/32.png) [@md-2000](https://boards.straightdope.com/u/md-2000)\ **Post date:** [March 25, 2024, 12:56am UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/11 "2024-03-25T00:56:41Z")
And… according to the news, Trump is not allowed to sell his shares for 6 months under the merger deal… unless the board grants him dispensation to do so. Basically, I don’t think he can get the board to meet, pass a motion, and then sell a wad of shares (without a price crash) in 24 hours. Tick tock… ---
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [March 25, 2024, 1:05am UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/12 "2024-03-25T01:05:51Z")
> [@LSLGuy](#): > > Securities law is real friendly to people who put enough disclaimers in their paperwork. But Donald had the most perfect disclaimers and that crooked judge ignored them!! ---
**Author:** ![md-2000](https://avatars.discourse-cdn.com/v4/letter/m/9d8465/32.png) [@md-2000](https://boards.straightdope.com/u/md-2000)\ **Post date:** [March 25, 2024, 1:16am UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/13 "2024-03-25T01:16:28Z")
Other suggestions on CNN were that someone had pumped money into the company before merger so the company was worth something before merging with “Truth” - but I have trouble imagining anyone putting billions into an empty shell… although stranger things have happened. ---
**Author:** ![Dr.Strangelove](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dr.strangelove/32/6613_2.png) [@Dr.Strangelove](https://boards.straightdope.com/u/Dr.Strangelove)\ **Post date:** [March 25, 2024, 1:25am UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/14 "2024-03-25T01:25:23Z")
> [@md-2000](#): > > but I have trouble imagining anyone putting billions into an empty shell The market cap of a company isn’t like some giant vat of money–it’s a completely artificial number. If a stock has a price of $X, it just means there’s one person willing to buy one share at that price (well, sorta–there’s actually separate bid and ask prices). And the market cap of that company is just $X times the number of outstanding shares. It doesn’t remotely imply that there was someone that pumped in that amount of money, or that there’s anyone willing to pay that much for the entire amount. In short, if there is manipulation, it may not actually take that many dollars to accomplish. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [March 25, 2024, 11:36am UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/15 "2024-03-25T11:36:23Z")
> [@md-2000](#): > > but I have trouble imagining anyone putting billions into an empty shell… although stranger things have happened. As @Dr.Strangelove said, they don’t need to have pumped nearly that much money to have achieved that stock price. And if the actual goal is to indirectly pay off trump for his services rendered to you as former president, or to buy his services as hoped-for future president, I can think of many “anyones” who’d happily throw a few (dozen) million in the pot each. Russia, Saudi Arabia, various uber-wealthy people, certain gangs, etc. When all the decisions of the the executive branch are for sale, there’s a lot to sell and the bidding gets up to dizzying numbers pretty easily. ---
**Author:** ![snowthx](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/snowthx/32/10660_2.png) [@snowthx](https://boards.straightdope.com/u/snowthx)\ **Post date:** [March 25, 2024, 12:16pm UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/16 "2024-03-25T12:16:53Z")
But, who is on that board? If it’s made up of Trump sycophants, then its an ace in the hole. If not, then the usual pressure tactics will be engaged (“you got a nice house and family here - be a shame if something happened to them.”). ---
**Author:** ![DCnDC](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dcndc/32/2842_2.png) [@DCnDC](https://boards.straightdope.com/u/DCnDC)\ **Post date:** [March 25, 2024, 12:29pm UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/17 "2024-03-25T12:29:33Z")
> [@md-2000](#): > > I have trouble imagining anyone putting billions into an empty shell… It’s my understanding that’s mostly or entirely the point of SPACs. ---
**Author:** ![md-2000](https://avatars.discourse-cdn.com/v4/letter/m/9d8465/32.png) [@md-2000](https://boards.straightdope.com/u/md-2000)\ **Post date:** [March 25, 2024, 12:43pm UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/18 "2024-03-25T12:43:43Z")
> [@DCnDC](#): > > > [@md-2000](#): > > > > I have trouble imagining anyone putting billions into an empty shell… > > It’s my understanding that’s mostly or entirely the point of SPACs. I guess **Dr Strangelove** has it right - thanks - the stock price is a fake, and it wouldn’t (didn’t?) take much to pump up one stock. Not to be confused with actual perceived value. > [@LSLGuy](#): > > And if the actual goal is to indirectly pay off trump for his services rendered to you as former president, or to buy his services as hoped-for future president, I can think of many “anyones” who’d happily throw a few (dozen) million in the pot each. Russia, Saudi Arabia, various uber-wealthy people, certain gangs, etc. But the question then becomes, does it look like there’s value for money? (Which would degenerate this discussion into the polling data for November). And there’s a big difference between a few (dozen) million and half a billion. The same discussions on CNN etc. mention that anyone who would want to shell out $500M would be investing in the future, not the past. If they haven’t done it yet, directly, by putting up a bond, they won’t likely be doing it indirectly. (IIRC anyone who buys more than 10% of a traded company has to declare, so again any large sums coming in would be public knowledge?) The stock really has nowhere to go but down as people realize there’s no “there” there, so I assume the savvy uber-wealthy are not going to throw away money on a guaranteed stock loss. ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [March 25, 2024, 3:29pm UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/19 "2024-03-25T15:29:05Z")
The stock price isn’t ‘fake’, it’s an emergent number produced by people asking and bidding. In the case of a SPAC, the price is likely going to be based on expectations of value when the SPAC buys its intended target. SPACS themselves are an answer to the increased regulatory burdens placed on IPOs. They are an unintended consequence of financial regulation. It turns out they have other advantages over IPOs, so they are probably here to stay. ---
**Author:** ![LSLGuy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lslguy/32/5813_2.png) [@LSLGuy](https://boards.straightdope.com/u/LSLGuy)\ **Post date:** [March 25, 2024, 5:03pm UTC](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226/20 "2024-03-25T17:03:51Z")
> [@Sam\_Stone](#): > > so they are probably here to stay. At least until the regulators catch up with them. Then a new set of initials will be invented for something else that colors well outside the lines of the then-current regulations. Just like SPACs do now versus IPOs. [Next page](https://boards.straightdope.com/t/why-is-the-valuation-so-high-for-the-spac-merging-with-truth-social/999226.md?page=2)