Douglas Cohn and Eleanor Clift: Taking Truth Social public perilous for Trump

As Truth Social goes, so shall go the Trump campaign. If Truth Social is riding high, so will Donald Trump; if not?

Donald Trump's cash crunch eased somewhat when an appellate court lowered the sum he needs to post bond in a New York civil fraud case, and his social media company, Truth Social, initially took off like a rocket on Wall Street.

Estimates are that Trump's stock in Truth Social, where he is the largest stockholder with a 58 percent share, could boost his income by billions of dollars, but he is prohibited from cashing in or even borrowing against his shares for six months, so there is no immediate relief for him.

Even so, knowing he likely has a couple billion in a stock reserve must surely help. That is, as long as the stock keeps performing. Right now, it is trading high due to the good will and excitement of Trump's MAGA base. They want to believe their hero whom they have stuck with through multiple indictments is still the rich real estate tycoon they fell in love with almost a decade ago.

The challenge is that it is mostly a mirage. A social media site relies upon advertisers; advertisers rely upon viewers and users. But Truth Social lost $49 million last year and had just 494,000 active U.S. users in February. To put this in context, X, formerly known as Twitter, has 75 million users and Facebook has 142 million.

In Wall Street parlance, Trump Media and Technology, which owns Truth Social, is a "bubble" stock, irrationally inflated and likely to pop. This is a stock custom made for the MAGA base, people who believe in him and want to hitch a ride to fame and money, but institutional investors, like banks, are not going to buy it.

So far, the inflated value of the stock has Trump gloating all the way to the courtroom. The opening price of $78 (now $60) translated into nearly $6 billion for Trump, who as the dominant stockholder, has 79 million shares.

There is no rational reason to buy Trump Social. Its fundamentals (revenue and earnings) are weak to nonexistent, and unless Trump can produce something quickly to demonstrate the company's potential for earnings, and an ability to attract users, the excitement will fade.

The excitement around this stock reminds us once again of the hold Trump has over a segment of Americans, but it is a segment like most segments that looks at pocketbook issues, especially their own pocketbooks, and when their Truth Social investments start to tumble, their affinity for Trump is sure to follow.

Then, there is another problem. Trump simply does not have the temperament to be a major player in a public company. Known for his bluff and bluster denouncing opponents, judges, prosecutors, and anyone he perceives to be an opponent, he has now placed himself in a box. If in discussing Truth Social he exaggerates, lies, or deceives he will run afoul of Securities and Exchange Commission rules and regulations. If he attempts to lessen stock losses and trades on insider knowledge he will run afoul of the SEC. And running afoul of the SEC can end him up in jail.

In short, what appeared to be a master stroke — taking his company public — may prove to be an even greater mistake than his hush money, election interference, asset inflation and classified document actions currently well along in the legal justice system because the various indictments attached to those trials may fail. But, for a man incapable of controlling his actions, words, or temper, the SEC is not an opponent he should be courting, certainly not in a court from which there is no escape.