Diane Francis: The shady deal that will cement Trump's power
Step aside, Fox News, and forget about peace and quiet, because there's a new game in town
It’s shocking that former U.S. president Donald Trump has been able to use a new stock market innovation to raise a war chest of billions of dollars in stock market valuation for his media company, in order to launch a new social networking platform dubbed Truth Social.
Trump plans to use his new social media platform to get around the bans imposed on him by Twitter, Facebook and YouTube after the Jan. 6 Capitol riot. Trump incorporated Trump Media & Technology Group shortly after he was kicked off the mainstream social media platforms, though he initially had difficulty financing it due to his track record of bankruptcies.
Enter Digital World Acquisition Corp., a special purpose acquisition company (SPAC) that went public last summer with $293 million from a private fund out of Shanghai and other investors.
Digital World’s SPAC was launched by Patrick Orlando, who had no track record running public companies, but that didn’t matter because SPACs are pure speculative bets, known as “blank cheque companies.” Investors in SPACs are betting that they are run by people with connections who will find, then make, profitable acquisitions in future.
In October, Orlando announced his SPAC would merge with Trump Media. Trump had just announced that he would launch Truth Social, to “create a media powerhouse to rival the liberal media consortium and fight back against the ‘Big Tech’ companies of Silicon Valley.” The SPAC’s stock skyrocketed in price.
Then, on Oct. 29, the New York Times reported that Orlando had held talks with Trump in March. If true, this meant the deal was prearranged, which would be illegal. But Bloomberg estimated Trump’s SPAC enterprise value had already risen to a staggering $8.2 billion. With Trump’s 58 per cent ownership in the new venture, his stake could theoretically be worth $4.8 billion — more than enough to establish a social media empire to help him take back the White House
Last week, Security and Exchange Commission (SEC) Chair Gary Gensler said tougher rules were being considered for SPACs, including more stringent disclosure requirements and liability obligations. This followed the announcement of an SEC investigation into Trump’s SPAC deal.
The problem with social media companies, like Meta (Facebook) and the others, is that they get a free pass when it comes to the content and advertising they publish. Truth Social will enjoy the added advantage of Section 230 of the Communications Decency Act of 1996, which exempts such platforms from legal liability or responsibility for any damaging material posted by their users. This exemption should have been rescinded years ago, but Big Tech lobbying has been ferocious and effective.
The problem with SPACs is that they allow companies to forgo many of the disclosure and liability requirements that are applied to other new issues. They either need to be subjected to much more stringent rules, as Gensler suggested, or made illegal.
Once Truth Social is launched, it’s foreseeable that anyone who searches the word “Truth” on Google will immediately be linked to Trump’s site, along with whatever it publishes. Trump’s lawyers are even trying to get trademarks for “Truth Social,” “truthing,” “retruth,” “post a truth” and the site’s “follow the truth” logo.
Trump’s new media platform will be headed by rabid Trump follower, Rep. Devin Nunes, who announced he will be resigning from the U.S. Congress in order to take the position. Its first order of business will likely be to try and entice the 87 million Twitter users who followed Trump when he was president to join the new network, with the aim of attracting radical content and tens of millions of eyeballs for advertisers.
Step aside, Fox News, and forget about peace and quiet, because there’s a new game in town — a platform that will allow any extreme right-winger and radical organization to post whatever they like without risk of censorship