An auditor has expressed doubts regarding the capacity of former President Donald Trump's publicly traded company to continue operating. On Sunday, Fox News host Maria Bartiromo questioned Truth Social CEO Devin Nunes about Trump's media company's recent $4 billion loss.
Concerns About Trump's Truth Social Reported Losses
Trump Media and Technology Group, which is the operator of the Truth Social platform, reported a loss of $58.2 million in 2023, with total revenues amounting to $4.1 million, and revealed that Trump Media's most significant expense for the year was interest payments exceeding $39 million, according to a filing with the Securities and Exchange Commission on Monday.
The filing contains a cautionary note from BF Borgers CPA PC, an independent Colorado-based accounting firm collaborating with Trump Media since 2022, which warns that the operating losses of Trump Media raise significant doubts about its ability to sustain operations. In a separate filing on Monday, Trump Media referenced the auditor's assessment when discussing the business' risks.
The note is dated March 25, when Trump's company commenced trading on the Nasdaq stock exchange under the symbol DJT, when it initially drew comparisons to so-called meme stocks. On Monday, shares of the company plummeted by over 21% to $48.66. Despite this drop, its market value remained substantial, at over $6.5 billion.
A spokesperson for Trump Media directed a request for comment to a news release issued on Monday, which quotes Trump Media CEO and former U.S. Rep. Devin Nunes.
Truth Social's Released Statement
Nunes stated in the release that the conclusion of the 2023 financials linked to the merger means Truth Social currently holds no debt and has over $200 million in reserves, paving the way for various opportunities to bolster and enrich its platform. He further emphasized their commitment to leveraging these opportunities to establish Truth Social as the ultimate free-speech platform for the American people.
According to the filing, the company acknowledged its anticipation of operating at a loss for the foreseeable future while focusing on expanding Truth Social's user base and attracting more advertisers. It cautioned that it would be premature to predict when profitability and positive cash flows from operations would be achieved.
As of the end of 2023, Trump Media possessed approximately $2.6 million in cash reserves and reported total liabilities amounting to $70.1 million, per the filing. The company had recently received a capital injection of around $300 million following its merger with shell company Digital World Acquisition Corp. a week prior.
Bartiromo asked Nunes, a former GOP California congressman when he expected Truth Social to become profitable. Nunes explained that the lengthy IPO process influences the numbers, which he considers overregulated. Despite the high costs associated with the venture, he highlighted that Truth Social was built for a fraction of the expense of many established tech companies. He emphasized that the company is well positioned, with no debt, a functional platform, and $200 million in reserves.
Additionally, Nunes stated that they are examining the entire ecosystem, considering options such as acquiring or developing technology. He emphasized their focus on a three-year plan to establish the company independently of big tech.
Trump's Positive Outlook on Truth Social's Trajectory
Despite the filings, Trump reaffirmed Nunes' earlier statement regarding the company's status, claiming on Thursday that the company had $200,000,000 in cash and zero debt. He asserted that this financial position was amazing and very good for a start-up that continues growing fast. More importantly, according to experts, it serves as the primary platform for disseminating information for Trump, which people want to hear more than anyone else in the world.
However, Todd Landman, a professor of political science in the School of Politics and International Relations at the University of Nottingham in the United Kingdom, has previously stated to Newsweek that Truth Social must attract more users to achieve success.
Landman highlighted the historical trajectories of companies like Amazon and Facebook, pointing out that Amazon, founded in 1994, took until 2001 to achieve profitability but has since experienced steady growth and profitability. Similarly, Facebook, established in 2004 as TheFacebook, did not become profitable until it significantly expanded its user base and diversified its business model, mainly through initiatives like its Marketplace and advertising space. According to Landman, the potential success of Truth Social and the DJT stock hinges on its ability to attract a significantly larger user base while providing appealing content, functionality, and services.
