How a Second Trump Presidency Could Impact Truth Social

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Nothing about the candidacy or presidency of Donald Trump was ever conventional. He took the White House with no prior experience in any elected office and, for the most part, sidestepped traditional media channels to get there.

Trump was the first candidate at a national level to really leverage social media, and his 2016 campaign will likely be looked at for decades as a case study for marketing across digital platforms. Whether you love him or hate him, he was the one of the first politicians to understand the power of Twitter, which is now known as X, Meta Platforms' (META) Facebook and other popular social networks.

Of course, 2024 is very different than 2016. Following the January 6, 2021, attack on the U.S. Capitol, Trump was kicked off of almost every social media platform. This led him to headline his own forum – Truth Social – as a competitor. Trump is the largest shareholder in Truth's parent company, Trump Media & Technology Group (DJT), owning 58.9% of shares outstanding as of June 10, according to S&P Global Market Intelligence.

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Most polls between Trump and Democratic presidential nominee Kamala Harris are within the margin of error, and the betting markets are putting roughly even money on a Trump win vs a Harris win. This raises the question: What happens to Truth Social if Trump retakes the White House?

Partisan press is nothing new. We've had newspapers aligned with political parties since the dawn of the republic. And partisan cable news channels and websites have been fixtures for decades. But we've never had an American president literally own a media company.

So, what should we think about this?

Let's take a quick step back to Trump's first term where a major controversy was his alleged violation of the Constitution's emoluments clauses. The Foreign Emoluments Clause requires Congress to consent to the president (or any federal official) receiving any personal benefit from a foreign government. The Domestic Emoluments Clause prohibits the president from receiving any personal benefit from a U.S. state or local government.

It was never determined whether Trump violated the emoluments clauses by maintaining his international hotel empire. This is because Trump was already out of office by the time the cases reached the Supreme Court, so the Supreme Court declared it moot. However, questions still linger considering foreign dignitaries are estimated to have spent millions of dollars at Trump properties during his presidency.

There is nothing strictly illegal about a president owning companies, but before Trump, virtually all presidents put their personal businesses and other assets into a blind trust to, at a minimum, avoid the image of impropriety. Trump broke with that tradition and would presumably do so again.

But would his ownership of Truth Social potentially be a violation of the emoluments clauses?

Maybe.

Might a foreign company wishing to curry favor with Trump advertise lavishly on Truth Social? Or might foreign banks feel pressured to lend to the company on favorable terms? Or might financiers – both foreign and domestic – feel obligated to buy shares of DJT stock?

Sure.

Any of these situations could be tough to prove though and, given the slow speed of the court system, it's not all that likely that a case would make it to the Supreme Court until after a second Trump presidency was already over.

Beyond emoluments, there's also the question of competition. It's certainly a possibility that a company or foreign entity could feel pressured to use Truth Social as a medium in favor of X, Facebook or others to curry favor with the president. Or a domestic politician might feel compelled to use Truth Social as a means of winning Trump's coveted endorsement.

These are all hypotheticals, of course. And it's not clear that Trump would technically be violating the emoluments clauses. But even if he were, there's no way to know how the courts would rule on these cases given the lack of precedent. The Constitution forbids emoluments, but it doesn't give a lot of detail as to how they're defined and it gives no guidance on how to punish an offender or remedy the situation.

Ultimately, it's important to remember that Truth Social is a business. And, at least until now, not a very profitable one. In the second quarter, Trump Media & Technology Group disclosed a net loss of $16.4 million on revenue of $837.000. Compare this to Facebook parent Meta Platforms' Q2 earnings of $13.5 billion on revenue of $39.1 billion.

The bottom line on Truth Social is that whether Trump wins or loses the election, its long-term viability as a social media company is questionable.

Charles Lewis Sizemore, CFA is the Chief Investment Officer of Sizemore Capital Management LLC, a registered investment advisor based in Dallas, Texas, where he specializes in dividend-focused portfolios and in building alternative allocations with minimal correlation to the stock market.