AILSA CHANG, HOST:
President Trump stands to make billions of dollars. That is thanks to a vote today that allows his social media app, Truth Social, to go public as early as next week. We're joined now by NPR's Rafael Nam to explain what is going on. Hey, Rafael.
RAFAEL NAM, BYLINE: Hi, Ailsa.
CHANG: OK. This all seems kind of out of the blue. Like, how is Truth Social about to become a public company? Is there going to be some IPO?
NAM: No, there's not going to be an IPO. This happened through what people in the markets call the back door.
CHANG: What?
NAM: About two years ago, there was a shell company specifically created to merge with Trump's social media company. It's a very small little company with a big name, Digital World Acquisition Corp.
CHANG: That's a mouthful.
NAM: And shareholders of that company, DWAC for short, finally voted today to approve that merger. So this back door listing means Trump's company has managed to avoid all the heavy regulatory scrutiny that would have come in a traditional initial public offering. And that's when you find out the true financial health of the company, the detailed financials that investors need to make a decision.
CHANG: So then what do we know so far about the financial health of Trump's company?
NAM: In one word, it is poor, maybe even really poor. It lost nearly $50 million in the first nine months of last year. It only had over 3 million sales in that period, 3 million, which is quite small. Yet it's valued in the billions with a B. Trump's stake alone is, as of now, worth over $3 billion. And this is money Trump desperately needs. He needs to come up with over $400 million to post a bond in a civil fraud case by Monday. Now, he's not allowed to sell his shares for six months, but he can always find ways around it. And he can use his stock holdings as collateral in exchange for a loan if he can find somebody willing to do that.
CHANG: Well, what happens when Truth Social starts trading next week?
NAM: So first, it's going to start trading under the name Trump Media and Technology Group with the stock symbol DJT, as in Donald J. Trump.
CHANG: Right.
NAM: And it's expected to be very volatile. In markets, we have this cliche that people use - roller coaster. And I can hear my old editor going, roller coaster. But honestly, that's how a lot of people have described this stock to me. And a lot of other experts I spoke to describe this as a typical meme stock. What that means is that the trading will have nothing to do with the company's actual financial health, just like in the pandemic. Remember AMC and GameStop?
CHANG: I do remember that.
NAM: Yeah. Those were the two stocks that skyrocketed...
CHANG: Yeah. It was crazy.
NAM: ...When a lot of regular people suddenly started to drive up the shares. And then the buying went viral like a meme. Something like that is what's likely to happen with this stock. But this time, Trump has something going for him. He has hundreds of thousands of his devoted followers that have already bought into the shell company and a lot more followers that are likely to start trading next week when it officially starts trading because they believe in him. This is Jay Ritter, a professor from the University of Florida.
JAY RITTER: This is largely a meme stock, where the price is divorced from the fundamental value of the company.
NAM: And when that happens, a stock becomes completely unpredictable.
CHANG: All right. So we're expecting quite a wild ride, a roller coaster, as you put it, when the stock starts trading next week, right?
NAM: Yes, wild. That stock symbol, DJT, those were the same initials of the last company he took public three decades ago, Trump Hotels and Casino Resorts. That company did not do well. In fact, it flopped, hurting a lot of investors.
CHANG: That is NPR's Rafael Nam. Thank you so much, Rafael.
NAM: Thank you, Ailsa. Transcript provided by NPR, Copyright NPR.
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