Wed. Dec 1st, 2021

Donald Trump helped The New York Times increase its subscriber base to 7.5 million from three million.  Photo: AFP
Donald Trump helped The New York Times increase its subscriber base to 7.5 million from three million. Photo: AFP

There is one problem with the flow of reporting that compares the new Donald Trump digital startup to “meme stocks” such as GameStop or the AMC movie chain whose stock prices exceed what even the most forgiving Wall Street analysts are willing to rationalize .

Meme stocks, in this newspaper’s narrow summary, are those that “are becoming wildly popular among online retailers for reasons other than their business prospects”. But the new Trump business, currently known as the Digital World Acquisition Corp, is a startup. It has no existing business to analyze, only its unknown potential. Thus, there is no real basis for jumping to the assumption that the market is merely irrational in terms of valuing the company between 2 billion. USD (2.66 billion USD) and 8 billion. USD, the trading area it has occupied since its debut a week ago.

Why might some think this is a fair ball field, especially compared to other highly speculative business assessments that the market has embraced, such as Teslas? The cause can jump out of you if you think about it. If he plays his cards right, Trump has a way of capturing some of the enormous value he has created for other media, from the New York Times to MSNBC.

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How can an analyst begin to spot the riches upside down? In the 2016 election, Trump was estimated by the data analysis company mediaQuant to have generated 5 billion. USD in free media coverage, twice as much as Hillary Clinton, which we could take to represent a normal candidate. So that’s USD 2.5 billion. In extra attention, the media gave Trump in the hunt for advertising dollars to himself.

The logo of Truth Social, Donald Trump's social networking platform, on a laptop.  Photo: AFP
The logo of Truth Social, Donald Trump’s social networking platform, on a laptop. Photo: AFP

After his victory in 2016, cable news ratings and ad sales did not fall into their usual free fall after the election. MSNBC would continue to have its best year ever. This year, ratings in prime time have dropped by more than 50 percent at CNN and MSNBC and 37 percent at Fox – the total answer of $ 500 million in lost profits thanks to less Trump.

Or take the “failing” New York Times. Its stock quadrupled, largely because of what industry consultant Ken Doctor calls the Trump bump. The 170-year-old newspaper saw its subscribers rise to 7.5 million from three million; the 144-year-old Washington Post, another Trump foil, saw his own numbers triple.

You would rightly doubt whether Trump can establish a management team to realize any of this implicit value across the digital sectors he targets, from social media and streaming to podcasts. His partners are mostly unknown financial engineering types. His trip as head of a listed casino company in the 1990s was a disaster for shareholders.

Then again, making money on his peculiar synergy with hostile media has been his seemingly successful business model since he left the White House, mainly through the sale of goods and campaign donations, but only with peanuts for him compared to what his silent media partners still are able to generate by whipping his face to their audience.

A SPAC, or special purpose acquisition company, to refresh your memory is a special kind of stock. A listed entity without assets attracts financing from investors in the expectation that it will buy potentially valuable assets for the money.

Some reports, by analogizing Trump SPAC into a meme stock, note that its subsequent trade has been significantly above the $ 875 million value allotted in Trump’s own press release announcing the trade. However, it is far from unusual for stock market investors to put a different value on a new business proposal than auditors would.

As with any business, there is a risk of execution, but the potential is here because of Trump’s irresistibility with the mainstream media. He does not have to be very shrewd to know that they will quickly enter into a voyeuristic relationship with his new business, leading traffic to his offer, even if they rationalize their actions by rejecting and demeaning him, which only serves to increase the traffic for both parties in the strange marriage to Trump and his media mockers.

If he plays it right, Trump can laugh all the way to the bank – and so can his mainstream media partners, even when wandering around in cognitive dissonance because of their independence from Trump.

Worth considering is another result. Trump, whose ownership of the new company is estimated to be 50 percent or more, only now appears to have discovered the abilities other former presidents have found to turn their work in the White House into gold jars (his own tour until last week had been a disaster financially). With a promising new online media empire to keep an eye on, he may well decide not to run in 2024 because he has found a safer way to satisfy his search for attention.

Wall Street Journal

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