Trump Media & Technology Group, the parent of Truth Social, disclosed “material weaknesses” in its financial reporting controls—acknowledging the risk of errors in its financial statements—according to a new filing with the Securities and Exchange Commission. Forbes staff writer Zach Everson joins "Forbes Newsroom" to discuss.
Read the full story on Forbes: https://www.forbes.com/sites/zacheverson/2025/05/10/trump-media-truth-social-donald-material-weakness-sec-filing/
Read the full story on Forbes: https://www.forbes.com/sites/zacheverson/2025/05/10/trump-media-truth-social-donald-material-weakness-sec-filing/
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00:00Hi, everybody. I'm Brittany Lewis, a breaking news reporter here at Forbes.
00:06Joining me now is my Forbes colleague, staff writer Zach Everson.
00:10Zach, thanks so much for joining me.
00:12Thanks for having me on again, Brittany.
00:14You have some interesting reporting on Truth Social's parent company, Trump Media and Technology Group,
00:21because according to an SEC filing, the company said they could have, quote,
00:25material weaknesses in its financial reporting controls.
00:29First of all, what exactly does that mean?
00:31Start off the conversation by defining material weaknesses.
00:35So material weaknesses in this instance, it's referring to internal controls over financial reporting is what they said,
00:42citing that they did not have like a formal infrastructure accounting process in there to handle concrete, complex transactions rather,
00:50and they did not have sufficient personnel who were trained in SEC filing requirements.
00:56I mean, that sounds pretty serious.
00:58Just how serious is that based on what you found from the SEC filing, what you found from your reporting?
01:05Yeah, honestly, it's kind of to be determined.
01:08Trump Media said, not a big deal.
01:10This is just standard boilerplate language.
01:12We've been saying this for a while, and they have in previous filings talked about material weaknesses.
01:17Standard stuff, not a big deal.
01:19Other people are saying, you know, hey, this could be indicative of a major problem.
01:23You know, anytime you see a company say material weakness like this, it often ends to them having to restate earnings.
01:29So really, it's just it's just kind of a red flag is something to watch right now.
01:34I know you're watching this, as you always do.
01:37They're saying that this is just a boilerplate issue.
01:40Has the company tried to right this ship at all, financially speaking, because if the infrastructure, something's wrong there, what are they trying to do to fix it?
01:48Yeah.
01:48So they laid out some concrete steps that they've taken in this filing where they said they've hired more accounting staff.
01:53They've brought in third party consultants and they began formalizing these processes.
01:57A spokesperson for Trump Media said that, you know, this is common, what they're going through for companies that merged with the SPAC.
02:04If you remember, Trump Media went public by merging with a blank check company called Digital World, and they're saying this is pretty common.
02:12You know, it's again, it's to be seen whether this leads to anything big or not.
02:17But, you know, you definitely given the option of having material, finding material weaknesses or not finding material weaknesses, probably best to not find material weaknesses in your company.
02:27I agree.
02:28But what are industry experts saying when they hear material weaknesses?
02:32I mean, does that raise alarms normally?
02:35What do they think?
02:36Yeah, it did.
02:37So I spoke with Michelle Letter, who's a journalist who does the newsletter Footnoted, which she spends a lot of time reviewing these SEC filings.
02:45And she's actually the person who originally flagged this to me and just said it is often a precursor to an earnings restatement.
02:52You know, anytime it's something that investors should absolutely pay attention to.
02:55And aside from this, the material weaknesses, was there anything else of note in that SEC filing?
03:03Anything pique your interest?
03:04What else was in there?
03:05There was.
03:06I'm glad you asked.
03:07So they reported a $31.7 million loss, net loss, which is not too surprising for young tech companies to experience a loss.
03:16You know, they're investing in growing their infrastructure.
03:18Trump Media has only been around for a couple of years.
03:21It's branching out into new areas, working into finance and streaming platform.
03:25The thing that really struck out, though, is that while they had that $31.7 million net loss, it was on just $821,000 in net sales.
03:35That is not a lot of money coming into the company.
03:39Now, they're sitting on a big cash pile.
03:41They have about $760 million in cash right there and just under $10 million in debt.
03:48But $821,000 in net sales is pretty weak.
03:53That does sound pretty weak.
03:55Something that sounds pretty strong, though, was how much the CEO, Devin Nunes, brought in last year.
04:00And you and I talked about this.
04:02He made $47 million last year, which included stock he can't even access until 2027.
04:07But does either the material weaknesses issue here or this $31.7 million net loss, does that have any impact or does that have the potential to impact his bottom line?
04:19It could.
04:20I mean, we don't know exactly what bonuses he might have and what they're tied to in terms of the company's performance there.
04:26You know, either way, even if it is less money in the future, he's still not in a bad place.
04:30You know, $47 million is pretty solid.
04:32And he's got some of these stock options that are going to be paid for years.
04:36So he will continue to get paid that way.
04:39So, yeah, he's doing pretty well.
04:40And Don Jr. is also doing pretty well.
04:41Don Jr. got $813,000 last year for serving on the board of directors.
04:47They had five meetings.
04:48He went to two of them.
04:49So that's about $400 and, what, $5,000 a meeting.
04:54Now, they did say he provided more work than that and did more for it.
04:57But still, it's a pretty hefty payday.
04:58That sounds like a pretty priceless meeting.
05:03I mean, when you break down the math that way.
05:05But I want to turn back to Devin Nunes, the CEO.
05:08Did he say anything here about these material weaknesses?
05:12So he's, you know, in the filing, which he signed, it said they're committed to remediating the material weaknesses described above in continuing remediation efforts during 2025.
05:21Now, what I found interesting about that statement was that just six weeks before, in a different SEC filing, Nunes had certified that Trump Media's internal controls, quote, provide reasonable assurance, end quote, of accurate financial reporting.
05:35So, you know, it is interesting.
05:37There does seem to be a little bit of a discrepancy there between what he had said six weeks previously.
05:42And is this the first time that Trump Media has had issues with financial records?
05:49Because you and I have been talking about this company really since that SPAC merger and onward.
05:55Yeah, they've had a whole host of problems that this company has experienced.
05:59Not all Trump Media's vaults, some of which were involving Digital World, the SPAC that it merged with.
06:05You've also got their accountants, Borgers, was busted for not following SEC law, agreed to a lifetime ban and a multimillion dollar fine.
06:16You know, that affected many clients.
06:19I mean, many clients, not just Trump.
06:20And it's certainly not Trump's fault for that.
06:22But that was a problem.
06:22And then, of course, you've got Donald Trump's own noted record with bookkeeping issues as evidenced by the cases against both him and the Trump organization where he was found guilty.
06:35And as we sit here right now, Trump Media's market cap is over $5.5 billion.
06:41Do these material weaknesses, does that have the potential to affect the market cap?
06:48It could if they come out and restate earnings.
06:50You know, I don't think my I don't think the filing led to anything.
06:53I don't think coverage of this led to any changes in the stock.
06:56It's hard to say for sure.
06:58But, you know, we will certainly might see some issues there as, you know, filings may or may not get amended.
07:05You know, the other thing is Trump Media's kind of defied investing logic all along.
07:10It has a much higher stock price than what you'd imagined it to have, what it should have based on its price to earnings ratio and traditional metrics there.
07:18So, you know, it's really tough to say what if anything matters.
07:21And why do you think it has defied the odds, so to speak, all along?
07:27I mean, what is that?
07:28Is it because the name is Trump Media?
07:31The president's name is in the company?
07:34I mean, what does what is that?
07:36Yeah, absolutely.
07:37Absolutely.
07:37I mean, it's completely tied into Donald Trump right there.
07:41And that, you know, owning the stock is a show of support for him.
07:44It is a way to help him increase his own net worth by, you know, buying shares that can increase the value of what he owns.
07:51You know, they don't share user data.
07:54Last I checked, you know, they don't talk about the number of monthly unique users and visitors they have, which is pretty common for other social media companies to share that information, which, you know, leads you to think it's not great.
08:05But the fact that it is doing so well as a stock compared to other companies, you know, certainly seems to be that the differentiator there is Trump.
08:15And is the president still financially benefiting from Trump Media now that he is the president?
08:22I mean, what does that look like and how much so does this impact his fortune?
08:26So he is connected.
08:29It's a bit of a web, intentionally so, where you've got all of his holdings are in a revocable trust of which he is both the sole beneficiary and the sole donor.
08:43And Donald Trump Jr. is the trustee.
08:46So, you know, this is money that he can access at any time.
08:49The White House has said, you know, oh, his money's in a trust.
08:51It's a way, but it's not.
08:53It's a revocable trust.
08:54So he can certainly tap into that.
08:55He hasn't sold any stock that we've seen from filings.
08:58He would have to report if he did that.
09:00And we haven't seen that yet.
09:01So, you know, it looks like right now it's largely theoretical increases and decreases in wealth.
09:06But it has pretty much doubled his wealth since he became involved with this company.
09:12And we had him worth about two, three billion dollars.
09:14And now, last I checked, he was working about five point four billion dollars.
09:17And it's largely the result of shares in this company.
09:21Well, Zach, per usual, I appreciate your reporting.
09:23Thanks for joining me.
09:24My pleasure.
09:26Thanks for having me.