Everything you need to know about Trump’s SPAC deal for his social media venture, Truth Social

But, Patrick Orlando, one of the main SPAC managers, has reportedly had meetings with Trump as early as March of this year about the acquisition, six months before it was publicly announced in September.

What’s Trump’s new business?

• Former United States President Donald Trump is launching a social media platform similar to Twitter and calling it Truth Social.

• According to Trump, the new platform is meant to “fight back against big tech,” the platforms, including Facebook, Twitter and Snapchat, that blocked him earlier this year.

• “We live in a world where the Taliban has a huge presence on Twitter, yet your favorite American president has been silenced,” Trump said in a statement. “This is unacceptable.” He also added, “I’m excited to soon begin sharing my thoughts on Truth Social and to fight back against big tech.”

• Some reports have said that he’s been working on a platform like this one since right after he left the White House in January.

• He also launched a website called “From The Desk of Donald J Trump,” which some described as a “glorified blog.” But after less than a month, the website was shut down.

• But there’s something different about Truth Social, and that’s that it has significant financial backing now. How? Well, with a SPAC. One worth US$300 million.

What’s a SPAC, again?

• A special-purpose acquisition company (or SPAC for short) is essentially a company that has no operations of its own and goes public for the sole purpose of merging with a private company to help that private company go public.

• These SPACs need to first try and get some initial investors to buy in, though, to help cover some of fees required while they look for this private company to help take public.

• To think about it differently, imagine that you bought a retail storefront on the main street of some town.

• Now you may not have a business within that store, but you can still get people interested in investing in. For example, you could say that, since it’s on the main street, whatever business that eventually goes in there will make money because there’s already lots of foot traffic in the area.

• When people invest, though, they aren’t investing in the actual building, but the potential of the business that might go on in it, and they’re putting it up to you to find the “right" business for that building,

• That storefront is kind of like a SPAC. And, when it’s finally time for a business to move in, all of those investors who invested in the building automatically hold shares in that business. In this case, all the investors that invested in the SPAC automatically hold shares in the private company that’s now public.

What about Truth Social’s SPAC?

• According to Stephen Bedosky, vice president at York International LLC. in New York, most SPACs seek innovation.

• “[The people who run SPACs] look from their investment banking backgrounds and see their experience and say ‘I can identify a company, the next big thing company better and we can take hold of it,’” he said.

• “You see a lot of it within technology, where it could be batteries, it could be retail goods, it could be consumer goods,” said Bedosky. “In technology, there’s always the next biggest thing,” he added.

• This is because, according to Bedosky, these ompanies typically need some funding fast to “turn their germ of an idea into something that’s huge and tremendous.”

So, is it just another social media platform?

• Well, the Truth Social website advertises that it “encourages an open, free, and honest global conversation without discriminating against political ideology.”

• But Dr. Lauren Wright, a professor of politics and public affairs at Princeton University, says that Truth Social isn’t anything new.

• “I could see it catching on if there were in fact fewer restrictions on user speech than Twitter and Facebook,” she said, “but actually, reporting on Truth Social’s user agreements has shown it’s really not all that different from Twitter and Facebook.”

• Truth Social’s terms of service say that it has the right to “refuse, restrict access to, limit the availability of, or disable (to the extent technologically feasible) your access or any of your contributions or any portion thereof.”

• In layman’s terms, they can ban or censor you for whatever reason they want, or even for no reason at all, in exactly the same way other tech platforms can.

• Dr. Wright also said that Truth Social “will heavily lean on Section 230 for protection,” referring to what is sometimes called “the most important law in tech,” which essentially protects companies for being liable for content put on their platforms by a third party.

So, how’s it going so far?

• Well, that really depends on who you ask.

• When the deal between the parent company for Truth Social, Trump Media and Technology Group and the SPAC Digital World Acquisition Corp (DWAC) was announced, DWAC stock value shot up close to 350%.

• So for investors that got in early, some have increased their returns by tenfold.

• But for the inexperienced traders who got onto the ship late because Trump’s name was attached, many said that they paying far more for a share of stock than that share was actually worth.

What’s next?

• Well, it looks like the SPAC that Trump Social is looking to merge with is currently facing some regulatory issues.

• You see, SPACs aren’t technically meant to know to have any clue of who they’re merging with until the initial public offering (IPO).

• But, Patrick Orlando, one of the main SPAC managers, has reportedly had meetings with Trump as early as March of this year about the acquisition, six months before it was publicly announced in September.

• So it now looks like DWAC might be dealing with some issues with the SEC and investors, with many saying that this situation highlights one of the main dangers of SPACs, which is that less due diligence is conducted compared to the traditional IPO process.

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