Trump’s Truth Social Among Trio of Flailing Anti-ESG Startups

Former President Donald Trump’s social media company, video platform Rumble Inc., and online marketplace PublicSquare Inc. share similar business strategies, chief among them a strategy to leverage their ideological bent to gain an edge over well-established competitors.

So far, that approach hasn’t panned out, putting the large pool of individual investors backing the companies at significant financial risk. All three companies have been chronically unprofitable and their stock values have plummeted.

Trump Media & Technology Group, established in 2022 as an alternative to X (formerly Twitter) hasn’t achieved profitability since it went public earlier this year as the parent company of the Truth Social platform—and its share prices have fluctuated wildly on the prospects of Trump’s reelection campaign. Rumble, an upstart rival to YouTube, has seen its share price fall 67.5% from its all-time high. And PublicSquare, which went public last summer as a conservative-focused alternative to Amazon.com, has also failed to return profits to shareholders and has seen its stock price drop almost 91% from its all-time high.

The entrance of values-driven companies to public markets is a relatively new phenomenon—in these three cases arising from the backlash against environmental, social, and governance principles.

Their similar financial struggles, some analysts and economists say, come down to the very characteristic the companies’ founders envisioned would set them apart: the values at their core, which limit their potential pool of customers and investors.

“The fact is, they’re trying to compete with very large existing platforms,” said Tensie Whelan, professor at New York University’s Stern Business School. “You have platforms going up against incumbents, platforms that have a lot of resources and money behind them—and I think you have a limited audience for it.”

Splashy Debut

All three of the conservative values-driven companies went public by merging with firms called special purpose acquisition companies, or SPACs, instead of the time- and paperwork-intensive traditional route for an initial public offering. This created unique issues for investors because they had less time and data at their disposal to vet the companies.

SPACs are shell companies that go public with the sole purpose of finding a promising private business to acquire. That acquired company then gets a shortcut to a listing on Nasdaq or the New York Stock Exchange.

Enthusiasm for SPAC deals plummeted in 2021 amid regulator scrutiny of the market and poor returns from many of the companies that went public during the boom. Companies that took this route to a listing can be breeding grounds for mismanagement, fraud, and losses.

Going public this way exposes retail investors—a term meaning individual investors—to significant risks in the emerging market of fee-free platforms and easy-to-use apps, coupled with limited financial data.

Trump Media, Rumble and PublicSquare rely heavily on this type of investor, as opposed to institutional investors. Retail investors own nearly 85% of shares issued by Trump Media. About 55% of shares issued by Rumble are owned by retail investors and they account for nearly 47% of PublicSquare’s shares, according to Bloomberg data. In comparison, individual investors own 14% of Amazon.com’s shares and institutional investors own nearly 63%.

There are three kinds of retail investors who buy shares into these companies, said Whelan, who’s also the founding director of the NYU’s Center for Sustainable Business. One bucket includes those who know what they’re getting into. The second is made up of folks who invest based on their ideologies and not on potential returns.

“There’s probably a third category who does believe they’re going to get good returns out of it for ideological reasons, I guess, and they may not be sophisticated investors,” Whelan said. “They’re most likely going to be in for a surprise.”

The trio of conservative brands, led by Trump Media, was probably overvalued initially, due to “excessive enthusiasm” from Trump’s core MAGA voters, said Kelly Shue, finance professor at Yale’s School of Management. But excitement over the anti-ESG, alternative-to-the-giant company, rather than business fundamentals of cash flow, only has so much runway, she added.

“It seems to have come down as a correction for that excessive amount of exuberance over the past year,” Shue said.

Troubled Bottom Line

While tempting to point to the falling share prices of each company since going public as a sign of trouble, investors typically look at net income, or operating profits, as a better gauge of corporate financial health.

All three companies reported losses for nearly every quarter that data is publicly available, before and after going public.

To be sure, a net loss is not a death knell. Some companies operate at losses for years and investors stick around if management can show a strategy for growing the business. For PublicSquare, Rumble, and Trump Media, hopes for growth hinge on enthusiasm for the anti-woke movement.

“The culture and mission of Rumble is one with rooted, unchanging, goalposts at a time when many other businesses are reevaluating their prior stances on ESG,” said Shannon Devine, who handles investor relations for Rumble, in a statement to Bloomberg Law. “Rumble is strong today and has a bright future because we are powered by the free exchange of ideas and the basic human right to self-expression.”

Devine said the company’s revenues are “increasing sequentially,” starting in the second quarter of 2024. However, revenues—typically expressed by sales—only offer a sliver of a company’s overall business health. Investors are optimistic that startups will turn a profit—eventually.

Devine also leads investor relations for Trump Media, but did not respond to a request for comment on that company’s profitability. PublicSquare CEO Michael Seifert also did not respond to a request for comment.

Donald Trump Jr., an early investor in PublicSquare and eldest son of the former president, said during a shareholder call in July 2023 that the market for the company could be as much as 175 million customers. It averaged more than 220,000 monthly users in the first quarter of 2024, the company said in its first-quarter regulatory filing. Amazon.com, comparably, has roughly 300 million customers annually and claims more than one-third market share for US retail online sales, according to Capital One Shopping Research.

“Woke corporations can’t even think about doing it—it doesn’t fit their ESG requirements, and I think it just creates an incredible opportunity to do something amazing for patriots across this country,” Trump Jr. said.

It’s been increasingly difficult to show any other factors besides the companies’ values that would spur growth, however, observers noted. PublicSquare’s Seifert reported $6 million in revenue in the second quarter of 2024, but ISS sell-side analyst Casey Lea rated the company as “Sell” in June, citing “diminishing profitability” as a red flag. And that’s reflected in the companies’ share prices, a gauge of investor sentiment in the company.

“Investors are very clear-headed about these things: they focus on net income and cash flow,” said Gita Rao, senior finance lecturer at MIT’s Sloan School of Management. “Ideology is all very fine, but, people don’t want to be in companies that have an ideology where they’re going to be losing money.”