Digital World Acquisition Corp (NASDAQ: DWAC) stock is down by more than 10% on Tuesday and has fallen by nearly 30% over the past five days. So why has this stock, which generated such interest in the second half of 2021, suffered so much in recent weeks?
The Truth Social Launch
The key thing to know about DWAC is that the stock is intrinsically linked to Donald Trump’s Trump Media & Technology Group through a reverse takeover deal. As such, the stock’s fate is closely tied to the success of the company’s major venture; the recently launched Truth Social social networking platform.
Unfortunately for investors, this launch has not gone smoothly. While the app was initially one of the Apple App Store’s most downloaded in late February when it launched, this strong start has quickly fallen away.
Part of this seems to be because of the bugs and failings surrounding the launch, with prospective users left unable to access the app after downloading it and instead being told they had been added to virtual waiting lists. Weeks later, many users have still to be granted access.
According to SimilarWeb, which ranks apps through a number of metrics, Truth Social is only just inside the top 200 news and media apps in the US. Meanwhile, publications like Bloomberg and TheWrap have reported that downloads and new signups have declined by more than 90% since the app launched.
It seems Truth Social is still a long way from its promise of disrupting the likes of Facebook, Amazon, Apple, Netflix, and Google. But the problems haven’t stopped here.
Truth Social Execs Quit
Reports have been emerging of the Truth Social app’s disappointing performance for a few weeks now, but the latest drop in share price seems linked to some high-profile personnel changes.
That’s because the business’ chief of technology Josh Adams and head of product development Billy Boozer have both left the company according to a report from Reuters. Their exit comes as Truth Social was reportedly working to prepare an Android version of its app, with the social media platform only available through the Apple Store at the moment.
Reuters quoted anonymous sources within the company as stating that Adams was “brains” behind the operation, while they also cast aspersions on whether the project could be successful without him.
Can Truth Social Turn This Around?
From this backdrop it looks incredibly unlikely that Truth Social can ever be the disruptive force it promised to be.
This is an arena already dominated by the likes of Twitter and Facebook. Even as a social media offering specifically targeting American conservatives, Truth Social still faces significant competition from rivals like Gab and Gettr.
Of course, Donald Trump is still wildly popular among American conservatives and so his endorsement could help the social media network belatedly find its feet. However, Trump, who was once so addicted to Twitter before being kicked off the app, has not used his Truth Social account to speak out in over a month.
It seems possible that he might be reluctant to further associate himself with a venture that has gone so badly wrong.
It’s also worth remembering that, though he has styled himself as a business genius, a number of the former President’s more outlandish ventures, such as the infamous Trump University, have ended in failure.
With Truth Social’s troubled launch and senior team members already heading out the door, this could be one investment opportunity that you would do better to avoid.
DWAC Stock Merger
So, how does DWAC factor into this? Essentially, the company has entered into a definitive merger agreement to acquire Trump Media & Technology Group for $1.3bn in stock and contingent pay-out via a reverse takeover.
According to a press release from October 2021, when the deal was reached, the transaction is expected to close in Q3 2022. It is subject to approval by stockholders of both the companies and other customary closing conditions, including any applicable regulatory approvals.
On November 18, 2021, it was announced that the Securities and Exchange Commission (SEC) would investigate the proposed transaction.
Trump Media & Technology Group is located in Palm Beach, Florida, United States and owns and operates social media platforms.