Transcript: Trump’s Truth Social hits the Nasdaq

This is an audio transcript of the FT News Briefing podcast episode: ‘Trump’s Truth Social hits the Nasdaq’

Sonja Hutson
Good morning from the Financial Times. Today is Wednesday, March 27th, and this is your FT News Briefing. Trump’s social media company went public, and some credit cards are cutting transaction fees in the US. Plus, UBS has some big goals after buying Credit Suisse. I’m Sonja Hutson, and here’s the news you need to start your day.

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Former US President Donald Trump’s social media business hit the public market yesterday, and the stock had a rollercoaster of a first day. The share price initially shot up more than 50 per cent but finished the day 16 per cent higher. The thing is, the company behind Truth Social isn’t actually doing very well. Here to explain what’s going on is the FT’s Ortenca Aliaj. Hi Ortenca.

Ortenca Aliaj
Hi.

Sonja Hutson
So before we dive into this market debut from Truth Social, can you just tell me a little bit about the company behind it and its financials?

Ortenca Aliaj
Sure. The company is called Trump Media & Technology Group. It’s a business set up by Donald Trump after he lost the 2020 election. And its main line of business is currently Truth Social, and it has just made its public markets debut after completing a merger with a special purpose acquisition company. In terms of financials, it’s a company that’s never turned a profit, though that’s not unusual for businesses that go public in this way. And it sustained, I think, about $40mn in losses in the first nine months of last year.

Sonja Hutson
All right. So why did the company decide to list then when its financials were looking so bad?

Ortenca Aliaj
I mean, this has been the dominant feature of the Spac market. It boomed in 2021, and largely the companies that were going public through these vehicles were very early-stage. And what investors were betting on was the future potential of that company. Obviously, TMTG — Trump’s company — stands out because it is founded by the former president of the United States, and it runs a social media platform on which he is very active.

Sonja Hutson
Got it. So what does Trump get out of this public listing? How much does he stand to benefit or lose?

Ortenca Aliaj
So when we talk about these types of listings, we always talk about paper gains or paper losses, right? Because this is money that he does not have access to. That being said, he owns a large stake in the business now, which, at today’s share price is worth about $5.5bn. And that’s a significant sum for someone who, a week ago was struggling to make a near $500mn payment for judgment in New York. Now, if Trump can figure out a way to turn that paper gain into actual cash, that’s the real question.

Sonja Hutson
Can he do that? What are his options here?

Ortenca Aliaj
He could go to the board, which we imagine would be fairly sympathetic to his request. That includes his eldest son. It also includes people who served in his administration. And he could say, hey, I have this six-month lock-up where I can’t sell shares, but maybe you guys could waive it or could allow me to waive it. The problem with that is that because he owns such a big stake in the company, if he was to sell any significant portion, it would just completely sink the share price. And then the other one is he could talk to financial firms and potentially say, look, I have this stake that is worth x amount currently over 5bn, can I use that as collateral? But I don’t know that many investment firms that would be willing to take that kind of collateral.

Sonja Hutson
All right. Well, let’s go back to the share price for a minute. Why were investors so excited?

Ortenca Aliaj
It’s the Trump name. I think Trump is a unique person in the American political system. And his name draws the sort of fervent support from people who like him, who think that he should be president. And I think that has driven, so far, this huge surge in the stock price. But there will also be people who don’t really care about Donald Trump, who just know that there are these huge fans of his who will stick by him no matter what, and they’re just here for the ride, basically.

Sonja Hutson
So we know that people got excited about the stock on day one of trading. But what about day two or day 30? Is the optimism for this company gonna continue?

Ortenca Aliaj
I don’t imagine it fading away just because Trump is now a real presence in all of our minds, particularly those people in America. He is obviously the Republican candidate for president again. So I think there’s still going to be enthusiasm for it. The question is, once this six-month lock-up expires and some of the insiders on the deal can sell, if they start selling, it could really, really impact the share price. So that’s when we’ll sort of see whether the bets on the company are because people think fundamentally it’s a great company, or whether it’s just we’re gonna ride the high and then sell when things get hairy.

Sonja Hutson
Ortenca Aliaj is the FT’s deputy US corporate finance editor. Thanks, Ortenca.

Ortenca Aliaj
Thank you.

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Sonja Hutson
Visa and Mastercard have agreed to cut their transaction fees in the US. Merchants say it’ll save them $30bn over the next five years. The agreement settled a lawsuit from a group of sellers. They argued that the credit card companies had inflated payment processing fees. The settlement also allows merchants to charge different prices to consumers based on which credit card they use. It does not, however, require them to pass on the savings they get from the lower fees to their customers.

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Just about a year ago, the Swiss banking giant UBS made a big move. It stepped in to save its rival, Credit Suisse. The merger was called the deal of the century, and it made UBS the second-largest bank in Europe. But the big question now is whether it can leverage this massive takeover well enough to become one of the biggest in the world. Here to talk to me about that is the FT’s Owen Walker. Hey, Owen.

Owen Walker
Hey. How’s it going?

Sonja Hutson
It’s going well. Thanks. So tell me a little bit about how UBS has been integrating Credit Suisse into its business model. What’s been the strategy there?

Owen Walker
So as you say, it’s one year since UBS agreed to buy Credit Suisse. And chief executive Sergio Ermotti has talked about 2024 as being really the hard year, the tricky year of this integration, which is expected to take about three, three and a half, years or so. Now, a lot of that focus is on the wealth management business. And increasingly, the wealth management business accounts for about half the total group’s profits. So it’s really about turbocharging that wealth business to achieve that three-year strategy.

Sonja Hutson
Yeah. And can you talk a little bit more about why the wealth division is so important to pulling this merger off successfully?

Owen Walker
Well, since the financial crisis, you’ve had banks like UBS, which have looked at the problems in their investment banks and thought, well, actually, it’s calmer, less volatile to focus on things like wealth management, investment banking. So from UBS’s perspective, they do see themselves as the biggest global wealth manager. And that’s very much where they see the growth of the new combined business with Credit Suisse coming from.

Sonja Hutson
And Owen, who is in charge of bringing all of this together, and what are their priorities in doing that?

Owen Walker
So the key individual here is a guy called Iqbal Khan, and he is head of the global wealth management division at UBS, and he’s widely tipped as the main internal candidate to succeed Sergio Ermotti when he does eventually step down, which would be after the merger is complete. I mean, initially he’s going to have to be looking at retaining clients within the wealth management business. A lot of clients, certainly in the fallout from Credit Suisse’s decline, they’re gonna be looking at and thinking, do we want to be partners with this bank? And there’ll be rivals circling and offering them incentives to switch to other private banks. And then you’ve got sort of the longer-term strategies, which is about protecting the dominant position globally, but also really a big emphasis on boosting the US operations over the longer term.

Sonja Hutson
Yeah. Tell me more about that. What are the big challenges that Khan is going to face in growing the wealth division?

Owen Walker
Well, undoubtedly, the biggest challenge for Khan is going to be about growing UBS’s footprint in the US, specifically in the wealth management sphere, because, you know, the acquisition of Credit Suisse doesn’t actually add anything to that business because Credit Suisse walked away from the North American wealth market in 2016. So UBS really does trail behind the market leaders, the Wall Street firms in the US in terms of wealth management. Now, the US wealth market is incredibly important, and especially for UBS, where, you know, half of its invested assets and nearly two-thirds of its advisers globally are based in the Americas. So, you know, I think in the next sort of three years or so, UBS will be trying to underpin that business and make it as efficient and as profitable as possible. And then in the next period, I think they’ll really look to grow in terms of scale.

Sonja Hutson
All right. Owen, I’m gonna do something risky and ask you to make a prediction here. Do you think that Khan can turn UBS’s wealth division around in the US?

Owen Walker
Yes. He’s very well-respected executive. He’s a deeply ambitious guy. He wants to be CEO of UBS, and that’s a big motivating factor for him. So I think in the next three to four years, UBS’s US business really will be purring along. I’m sure he’ll be using that when he writes his CV for that CEO role.

Sonja Hutson
All right. Owen, thanks for looking into your crystal ball for us. Owen Walker is the FT’s European banking correspondent.

Owen Walker
Thanks very much.

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Sonja Hutson
Before we go, a new law is taking aim at computers that work on Sundays in Germany. It is so important to rest on Sunday there that shops are actually required to be closed. But a regional supermarket chain called Tegut opened fully automated stores a few years ago that allow customers to shop without any workers present. And now, a German court has banned the practice. So it seems like even as automation becomes the norm, Germany is committed to holding on to its traditions.

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You can read more on all these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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