As former President Donald Trump's social media company, Truth Social, made its public market debut last week, sending its stock price soaring, potential investors are being cautioned about the numerous risks associated with the venture. The warnings come straight from two filings Truth Social submitted to the U.S. Securities and Exchange Commission (SEC) last month, which detail Trump's extensive legal troubles, history of business failures, and the platform's limited user base.

Among the looming threats cited in the filings are Trump's outstanding debts of more than half a billion dollars in civil verdicts, four pending criminal cases, and a track record of businesses filing for bankruptcy protection. The SEC documents also note that several of Trump's entrepreneurial efforts, such as Trump Shuttle, Inc., Trump University, and Trump Vodka, have completely flopped in the past.

Truth Social's own financial performance has been lackluster, with the company generating just $4.1 million in revenue and losing over $58 million in 2023, according to the SEC filings. The platform's advertising revenue, which accounts for all of its income, declined in the fourth quarter, with the company generating only $751,000 compared to over $1 million in the third quarter.

The SEC filings also highlight the limited reach of Truth Social, stating that the platform "has limited time to benefit from [Trump's] posts and followers may not find it compelling to use Truth Social to read his posts that quickly." The company acknowledges that it will need millions of users to register and regularly use the site to be successful, citing a 2021 Hill-HarrisX poll that found 54% of registered voters would not use Truth Social.

Despite these challenges, Truth Social's stock experienced a rollercoaster ride last week, opening at $70.90 per share on Tuesday and surging to $79.38 before dropping to $61.96 at the close of trading on Thursday. The company's market valuation has reached more than $7 billion, a massive disconnect from its financial fundamentals.

The SEC filings also provide a detailed history of Trump's numerous legal entanglements, including the New York case going to trial next month on charges of paying hush money to a porn star, the Georgia case where he's accused of trying to overturn the 2020 election, the Florida federal case charging him with keeping and hiding confidential documents at Mar-a-Lago, and the federal case for his actions before and during the Capitol insurrection on Jan. 6, 2021.

Truth Social warns that the "death, incarceration, or incapacity of President Trump" could be bad for business, given the unprecedented scope and scale of the legal proceedings he faces. The company also notes that Trump is on the hook for $88.3 million in two verdicts for defaming writer E. Jean Carroll and $454 million for operating a New York business rife with fraud.

Despite these red flags, Truth Social's licensing agreement with Trump prevents the company from terminating the deal due to his personal or political conduct, even if it could hurt the platform's reputation or brand.