Trump's Broken Social Media Venture Is Valued At Billions Of Dollars And Its Breaking Experts' Brains

from the the-nftification-of-stocks dept

Last week we wrote a bit about Trump's new planned social media website, Truth Social (which forbids too many capital letters, so I will oblige by not capitalizing the entire "Truth" part of the name, as Trump's branding apparently prefers). We mostly focused on the ridiculous terms of service (forbidding capital letters among other things), and the fact that it was already kicking people off the system (who only got on the system because Trump's coders apparently failed to properly secure the site pre-launch). We also talked briefly about how it appeared to be a reskin of Mastodon, and that's potentially an interesting legal issue, because it certainly appears to be violating the AGPLv3 license for Mastodon.

But, perhaps a more interesting story right now... is how the grift behind all of this is combining the whole Gamestonk craze and the NFT craze... and the SPAC craze to make absolutely no sense at all.

We had mentioned in passing in the original post that Trump's new company -- Trump Media and Technology Group (TMTG) -- was formed via a reverse merger using a SPAC. Such deals have become a popular sort of backdoor way to take a private company public, though, they're usually combined with some additional private investment (known as a PIPE -- a Private Investment in Public Equity) in order to afford the "takeover" of the private company that is becoming public. SPACs aren't new -- hell we wrote about Apple co-founder Steve Wozniak creating a SPAC back in 2006. But in the last few years, they've been all the rage.

But, Trump's SPAC deal is raising some eyebrows -- or frying some brains. My favorite analysis is the one done by the always excellent Matt Levine at Bloomberg where you can basically hear him tearing his hair out at the absurdity of it all and gradually watch as he comes to terms with the fact that nothing at all matters and it's all nonsense. As Levine notes, the real grift here is that it doesn't matter one bit if Trump has a good business plan for Truth Social or TMTG, because he's going to walk away with tons of cash just from the stock deal.

The point is that if you launch a company with the goal of making it profitable, you have to, like, have a workable business plan and execute on it and deal with a million different operational complexities. If you launch a company with the goal of selling a lot of stock, you have to get people to trust you and give you their money. There is some overlap between those things! But they are different things!

As Levine explains, this whole thing, is kinda like an NFT of Trump. It's a way for Trump fans to throw money at Trump to be part of the Trump brand.

But I think that a more realistic valuation method here is not to worry about cash flows at all — as Trump SPAC clearly does not — and treat the stock simply as a token of public interest in Donald Trump. My guess is that the price of Trump SPAC stock will not, for instance, be much affected by its earnings announcements, unless Trump himself does the earnings calls in which case it will go up no matter what he says. My guess is that the stock will not be particularly correlated with the stocks of other media or technology companies. My guess is that the stock will go up when Trump is on television, or if he announces that he’s running for president again. My guess is that if something bad happens to Trump — if he’s sued or arrested or banned by a new tech company or some new scandal comes out — then that will also make the stock go up, to own the libs or whatever. My guess is that each day that goes by without Trump news, the stock will go down a bit. My guess is that the stock is essentially a bet on Trump’s personal newsiness, on Trump-news volatility.

To be clear I have absolutely no corporate finance basis for these guesses; I don’t think that, like, getting sued for attacking protesters will be good for Trump Thing’s ad revenue or whatever. I don’t have some story of “public interest in Trump increases the expected value of Trump Thing's cash flows so the stock will go up.” I just think that the stock price will have nothing to do with the ad revenue; it will be based entirely on how much attention Trump’s fans are paying to Trump.

And, of course, since Levine wrote that, we've already seen more evidence that this was true. Indeed, as Levine mentioned in his piece, it wouldn't necessarily just be Trumpists buying into DWAC, the stock for the new TMTG, it would also be those assuming that Trumpists would drive the stock up. It didn't take long for WallStreetBets, the Reddit community responsible for the original GameStonks situation to go all in on the stock.

Alex Wilhelm at TechCrunch sums it all up best:

None of this makes sense. Even by the standards of 2021 and the SPAC era, this is all very stupid.

Even Matt Levine seems to be about ready to give everything up:

Doesn’t it feel like there has been a paradigm shift, a regime change? Doesn’t it feel like for the last 80 or so years there has been a dominant view of investing, a first-page-of-the-textbook given, that investments are worth the present value of their expected future cash flows? Doesn’t it feel like that world has ended and a new one has begun? I should go buy some Dogecoin.

It is a silly feeding frenzy, and someone will get left holding the bag. It's unlikely to be Donald Trump, of course. It doesn't appear he's put any of his own money behind any of this. No one really believes that Truth Social or TMTG is a "unicorn" worth billions of dollars. But there's a lot of people chasing the greater fool right now, and it's kind of amusing to watch from the sidelines -- though it won't be surprising when the whole thing comes crashing down.

Filed Under: donald trump, fundamentals, grift, nfts, reverse merger, social media, spac, stock
Companies: dwac, tmtg, truth social

The TikTok 'Deal' Was A Grift From The Start: Accomplishes None Of The Stated Goals; Just Helps Trump & Friends

from the a-joke dept

A week ago, we explained that the announced "deal" between Oracle and TikTok was a complete joke and what appeared to be a grift to let Trump claim he had done something, while really just handing a big contract to one of his biggest supporters. That was based on the preliminary details. As more details came out, it became even clearer that the whole thing was a joke. TikTok's investors actively recruited Oracle because they knew they needed to find a company that "Trump liked."

Over the weekend, Trump officially gave the "okay" on the Oracle deal (which now also involves Walmart). And before we get into the details of the deal and why it's a total grift, I'd like to just step back and highlight:

It is positively insane, Banana Republic, kleptocratic nonsense that any business deal should hinge on whether the President himself gives it a thumbs up or a thumbs down. Do not let all the insanity of this current administration hide this fact. If this had happened during the Obama administration, how crazy do you think Hannity/Carlson/Breitbart/etc. would be going right now about "big government" and claiming that the President is corrupt beyond belief? We should never, ever be in a situation where any President is giving the personal thumbs up or thumbs down to a business deal (and that's leaving out the fact that he forced this business deal in the first place with a blatantly unconstitutional executive order.

Okay, now back to the actual deal. Oracle and Walmart will team up to create a "new" (very much in quotes) company called TikTok Global that will be headquartered in the US. Of course, this is a joke. TikTok already has US operations. Oracle and Walmart will end up with a small equity stake in this "new" company (combined about 20%), but the Chinese company ByteDance will still own the majority of the company and will still control the TikTok algorithm. While there is some chatter about how the data will be hosted in the US, for the most part that was already true. Oracle says that it will review things to make sure that the data is secure, but remember, this is the same Oracle that collects a shit ton of data on internet users via Blue Kai, and then leaked it all. It's also the same Oracle that works closely with US spy agencies and isn't exactly known as being particularly good at security.

As the NY Times notes, this deal appears to accomplish literally nothing. As we said before, it was all performative, letting Trump claim he had "done something," when the rationale for the deal ("national security") was always bogus, and this is proved by the fact that nothing in the new setup changes whatever national security questions there were about the app before. So, rather than force ByteDance to "sell" the company to protect "US national security" as the NY Times rightly notes all that came out of this was:

A cloud computing contract for the Silicon Valley business software company Oracle, a merchandising deal for Walmart and a claim of victory for President Trump.

As former FCC chair Tom Wheeler tells the NY Times:

Vetting deals “is normally a process that involves multiple thoughtful people coming to the issue from multiple different concerns,” said Tom Wheeler, a former Democratic chairman of the Federal Communications Commission. “This appears as though what passes for process is what pleases one man: Donald J. Trump.”

Again, Banana Republic kleptocracy.

The NY Times also noted that Walmart either seemed to rush out its press release over the deal, or whoever wrote it had a heart attack in the process of composing it:

“This unique technology eliminates the risk of foreign governments spying on American users or trying to influence them with disinformation,” the company said. “Ekejechb ecehggedkrrnikldebgtkjkddhfdenbhbkuk.”

And that's not even getting into the whole issue of the mysterious $5 billion education fund. With the announcement, Oracle and Walmart said the new company would "pay $5 billion in new taxes to the Treasury," and then separately that it would "develop an educational curriculum driven by artificial intelligence to teach children basic reading, history and other subjects." Those two points got conflated to suggest that it was putting $5 billion into that project -- which sounded suspiciously like the finder's fee Trump demanded when first talking about forcing TikTok to be sold.

This got even more insane when Trump declared that he wanted the $5 billion to be used for his new 1776 history project, which is his new fascistic indoctrination education program, which Trump and his idiot followers insist is necessary because they falsely believe that kids are being indoctrinated to hate America (they're not -- they're just finally being taught, at least a little bit, that slavery is a key part of American history).

And the story got even more crazy when, after Trump talked about all of this, ByteDance came out with a giant shrug, saying it was totally unaware of any $5 billion education fund and appeared to have no interest in actually doing that.

It seems that most of the confusion was -- as per usual -- on the part of our not very intelligent President, who couldn't comprehend that the small education fund was different than the $5 billion, which is merely just estimate future tax revenues to the Treasury that, given the tax breaks this same President has helped set up, will probably never actually materialize.

It's like a clusterfuck of stupidity, corruption and kleptocracy. It's America in 2020.

Filed Under: banana republic, china, donald trump, grift, ieepa, kleptocracy, larry ellison, nonsense
Companies: bytedance, oracle, tiktok, walmart

The TikTok Oracle Grift: Insiders Admit They Went Hunting For A Tech Company The President Liked

from the because-of-course dept

Earlier this week we wrote about the absolute grift involved in the TikTok / Oracle deal. Contrary to the framing that this was Oracle "buying" TikTok to satisfy the President's unconstitutional demand that the Chinese company ByteDance sell TikTok to an American company, the story showed that this was just a hosting deal for Oracle's cloud service, which is way down the list of top cloud providers.

The end result was no actual sale (though the Treasury Department is still "reviewing" the deal), but a big contract for Oracle, and a bogus story in which the President can pretend he forced ByteDance to "sell" TikTok, even though it retains ownership in the company (there are some rumors that the hosting deal will include a small, and probably symbolic, equity stake for Oracle).

The other key point I noted in my article was that Oracle's executive leadership, starting with Larry Ellison, but including CEO Safra Catz, have been cozying up to Trump and the White House ever since Trump became President. While much of Silicon Valley's executive teams have made it quite clear how uncomfortable they are with a Trump Presidency, Oracle... has done the opposite. And while I framed it as being convenient that things worked out this way, a report from the Wall Street Journal highlights how this was the grift from day one.

Oracle was originally brought into the negotiations to provide an alternative to Microsoft Corp., a rival bidder with Walmart as a partner, said one person familiar with the talks. The U.S. investment firms Sequoia Capital and General Atlantic, which are existing investors in ByteDance, went in search of a tech company with close ties to the administration and settled on Oracle, the person said.

As we discussed earlier, from day one of this silly ordeal, the President made it clear he would steer a deal to a company he personally liked (meaning one where the leadership licked his boots, apparently). After all, after first saying that he was going to block TikTok in the US, as rumors of Microsoft's involvement came out, Trump immediately said that he would block a deal with Microsoft. Microsoft had to go grovelling to Trump over a weekend to have him say, grudgingly, they could continue to pursue a deal.

Then, of course, there's the Walmart story. Rumors came out that Walmart was a leading bidder, but Trump's White House stepped in and told them they would block that deal too, because it would show that Trump's figleaf "national security" explanation for banning TikTok was an obvious lie.

In other words, throughout this nonsense process, the President -- who at one point also demanded a finder's fee for any deal -- made it clear that this was about his own whims. He was forcing a sale, and he was going to pick a winner -- and the winner had to be someone he liked.

That doesn't seem like the kind of free market people appreciate. It seems like the very worst of a corrupt crony capitalist system.

The WSJ piece details how being corrupt this whole process was. It was all about stroking Trump's ego, and lining his campaign's bank account:

Sequoia Capital used its own connections to push the administration to allow TikTok to continue operating in the U.S., say people familiar with the discussions. Doug Leone, the firm’s global managing partner who took a lead role lobbying on TikTok’s behalf, has donated tens of thousands of dollars to Republican candidates this election season along with his wife, including to the president’s re-election campaign. Mr. Leone also held a reception at his Silicon Valley home for Secretary of State Mike Pompeo in January.

Ms. Catz’s relationship to Mr. Trump could give Oracle a leg up in getting the deal approved, according to people in contact with the White House. Oracle has worked for decades with the U.S. government, including multiple contracts with the national-security establishment.

Once again, this was nothing but performative nonsense from the President that ends in his own supporters lining their pockets. None of it seems to have anything to do with actual national security. It's a joke.

Filed Under: china, corruption, donald trump, doug leone, grift, larry ellison, safra catz
Companies: bytedance, microsoft, oracle, sequoia, tiktok, walmart

Oracle Doesn't Buy TikTok, But Gets A Lucrative Hosting Deal, And Trump & Friends Will Pretend This Means Something

from the art-of-the-grift dept

The TikTok saga, which was insanely stupid to begin with, kicked into overdrive last month when President Trump issued a blatantly unconstitutional executive order that was designed to force ByteDance to sell TikTok to an American company. We had all sorts of questions about this, but effectively ByteDance had until this week to find a buyer. While Microsoft was rumored for a while, late last night Microsoft announced that its proposal had been rejected and the only competitor left standing was... wait for it... Oracle. This led many to conclude that Oracle was buying TikTok. That is not the case. But hold on, we'll get there.

There was one other serious bidder: Walmart. Last night the company claimed it was still interested in buying TikTok, but the White House rejected that plan, because it would have made it totally obvious that the "national security" pretense for demanding the sale was obvious bullshit. Nope, the White House said: it has to be sold to a "tech" company, so that the White House can stand by its totally unsubstantiated by evidence claims that TikTok's dancing teens represented a national security threat.

So, with Walmart blocked, and Microsoft's deal not accepted, that left Oracle. But immediately the descriptions of Oracle's involvement were... weird. They very clearly did not say anything about "buying" TikTok. Instead, Oracle put out a very short press release saying that it will "serve as the trusted technology provider" to TikTok. That's not how you describe a sale.

This is a hosting deal.

Oracle will just host TikTok on its wannabe, way-behind-the-competition, cloud platform. And Trump and his cult-like supporters will pretend this actually accomplishes something. Oracle's executive suite has long been vocal Trump supporters, so this basically dumps a giant hosting contract into Oracle's lap. ByteDance will effectively still own TikTok, and Trump will pretend he's done something. For what it's worth, this is the second big Oracle cloud deal done in the last few months, with the previous one being with videoconferencing company Zoom.

As Russell Brandom over at the Verge notes, this deal "accomplished nothing." ByteDance still owns TikTok (and, according to reports, retains full control over TikTok's algorithm). As former Yahoo and Facebook Chief Security Officer Alex Stamos points out, literally none of the concerns people have raised about TikTok (most of which were bogus in the first place) are solved by an Oracle hosting deal:

As Stamos points out, accepting this deal would show that it's nothing but "pure grift," basically dumping a forced contract into Oracle's lap, a company which (again) has had an executive licking Trump's boots since day one.

And people can't even truly argue that Oracle will somehow make whatever little "private" data there is on TikTok "more secure." It's not like it was just months ago that an Oracle-owned subsidiary, BlueKai, leaked data that tracked users all over the web, exposing billions of records.

In other words, the whole thing was a joke. Like so much of this administration it was performative nonsense by Trump, who was mad that some kids made him look foolish on TikTok, combined with anti-Chinese racism, to push for a deal he had no legal right to push for, resulting in a weird scramble that doesn't accomplish what he wanted, but does shift a bunch of money to some of his vocal and wealthy supporters. The "Art of the Grift."

Filed Under: china, corruption, donald trump, grift, hosting, larry ellison, national security, security
Companies: bytedance, microsoft, oracle, tiktok