WILLIAM BRANGHAM: Donald Trump's social media platform, TRUTH Social, made its public debut on the Nasdaq yesterday.
The stock price soared, reportedly powered by supporters looking to invest in the former president's business.
But the platform's stock success does not seem to match its own financials.
TRUTH Social lost $49 million last year.
It also has far fewer users than any other social network that has gone public.
The tech research firm SimilarWeb estimates TRUTH Social had about five million users last month.
That's compared to more than three billion on Facebook and two billion on TikTok.
Dan Alexander is a senior editor at "Forbes" who has spent years covering the former president's sprawling business empire.
And he joins us now.
Dan Alexander, thank you so much for being here.
What was your reaction yesterday when you saw that TRUTH Social stock price just shoot through the roof?
DAN ALEXANDER, "Forbes": Well, it was a reminder of what happened in 2021, when this idea of creating a Trump-branded social media network first hit the news.
And at that moment, it was part of a SPAC deal.
And the SPAC, similar to what you saw happen with the stock yesterday, shot through the roof.
And that lasted for about two days.
And then it gradually over time started to step down and down and down.
And if history repeats itself, that means that a lot of the people who are buying in today and yesterday are set to lose money.
WILLIAM BRANGHAM: The thing I don't quite get is that a company with these sorts of financials, how is it that it ended up with this valuation in the multiple billions of dollars?
DAN ALEXANDER: Well, something's worth what people are willing to pay for it.
And there are a lot of people right now who are extremely excited about the idea that they can buy stock and therefore become sort of a business partner of Donald Trump.
Now, that doesn't have anything to do with the financials.
It doesn't have much to do with the future of the company.
There's no serious stock analyst who would say that this valuation makes sense.
But, nonetheless, if enough people are excited about something, then what you have is mania, and people get excited and they bid it up to a crazy price, which is where we are.
WILLIAM BRANGHAM: Now, we know the former president has got this nearly half-a-billion-dollar civil fraud judgment in New York.
He's got $80 million owed to E. Jean Carroll.
He's got enormous legal bills.
On some level, if people are enthusiastic about the former president and they want to find a way to fill up his wallet, like investing in his company, what is -- there's nothing really wrong with that, is there?
DAN ALEXANDER: No, I mean, it's just a risky move.
People are free to spend and potentially lose money as they please.
If they choose to buy these stocks at overvalued prices, OK, then so be it.
If people are donating to a presidential campaign, their return on investment is going to be zero.
So, if people are donating or investing in Trump's social media network, at least they're not going to get totally wiped out, at least in the short term.
WILLIAM BRANGHAM: So, I understand you did just a quick calculation.
Do you have a rough sense of what TRUTH Social going public did for Donald Trump's net worth?
DAN ALEXANDER: Yes.
So, right now, at this very moment, Donald Trump is worth over $7 billion, and over $5 billion of that is because of this social media company.
So, the vast majority of his fortune right now is tied up in these illiquid shares that he holds in a fledgling social media company that people are unreasonably excited about.
WILLIAM BRANGHAM: So, illiquid, meaning he can't tap into that just yet; is that right?
DAN ALEXANDER: Yes, and that's a key point.
He has lockup provisions as part of this deal, which prevent him from either selling or borrowing against those shares for roughly six months.
Now, maybe something happens where they can tweak the rules, but, in doing so, they would essentially be inviting shareholder lawsuits.
And I think it would be difficult for them to be able to change it.
What Trump is hoping for here is that the stock price will be able to hang on for those six months, maybe not at its sky-high level that it is right now, but, even if it dropped by 50 percent, that's still an enormous amount of money for him that he can, sell those shares, part of them, nearly all of them, whatever, and cash in a huge amount of money, money that he hasn't seen in years.
WILLIAM BRANGHAM: Now, I know, as I mentioned, you have covered Trump's previous businesses for many, many years.
You even wrote a book about it.
Does what you're seeing here parallel any of those previous business ventures?
DAN ALEXANDER: It does.
If you look back at Donald Trump's history, he is really a master at convincing people to throw piles of money at him, even when they should be wary.
And what's interesting is, if you look at this over the years, the sorts of people throwing those piles of money at him have become less and less likely to scrub the financials of the actual business.
So, if you go back to the 1980s, when he's building in Atlantic City, he's borrowing from A-list, names you would know, banks on Wall Street.
These are people who are going to scrub financials very carefully.
However, they didn't do it carefully enough in that case.
And there were several bankruptcies, and many of those lenders lost money.
Then he went to the public markets, which are known for being -- for putting some scrutiny in, but maybe not as much, or they're not as careful as banks are.
And, ultimately, his casino company, as a public -- publicly traded entity, went bankrupt twice, and those stockholders got wiped out.
Now, you have the latest iteration of this, where he's going back to the public markets, now capitalizing on his political supporters who want to be in business with him and also just on people who like trading meme stocks.
Some people like going to the casino.
Other people like trading meme stocks and just seeing what's going to happen.
These are not people who are going to be carefully looking at the financials and figuring out, OK, does this valuation make sense?
And do I think that this company is going to be profitable enough to justify my investment?
By and large, these are people who just say, hey, I want to be in business with Donald Trump and here's my opportunity to do so.
WILLIAM BRANGHAM: It will be certainly an interesting six months to see how that progresses.
Dan Alexander of "Forbes," thank you so much for being here.
DAN ALEXANDER: Thank you.
