Why Is Digital World (DWAC) Stock Down Today?

It’s been a difficult week and month for Digital World Acquisition Corp. (NASDAQ:DWAC), and all signs of why point to the lackluster launch of Truth Social. Many waited eagerly for the launch of former president Donald Trump’s social media platform, but the outcome was underwhelming. Now, DWAC stock is falling fast as interest in the platform declines. Special purpose acquisition companies (SPACs) have taken a beating lately. However, DWAC’s company-specific problems are more concerning.

A hand hovers over a phone screen with the Truth Social social media logo
Source: rafapress / Shutterstock

What’s Happening With DWAC Stock

Yesterday brought bad news for DWAC as the U.S. Securities and Exchange Commission (SEC) proposed new rules for SPACs. While that didn’t directly push DWAC stock down, it didn’t spark any new enthusiasm among investors. Today, shares have continued plunging. At the time of writing, they are declining almost 2.5%. The real reason why has become clear: interest in the app is declining at an astonishing rate. Markets Insider reports that since the app launched, downloads have plummeted by 93%.

Why It Matters

The downward trajectory of DWAC stock since its historic rise should illustrate something important for investors. Truth Social’s power to elevate the company wasn’t due to its actual real-world utility. It came from the buzz generated by the anticipation. If the platform was still pre-launch, DWAC stock would still be rising. When it debuted, problems with the app indicated that the team behind it had moved prematurely.

In the weeks since, it’s become increasingly clear that interest in the app from the general public has drained. As Slate reported in early March, “no one really appears to be using the social network, not even the former president.” That hasn’t changed. Trump himself has only posted once on the platform. Given how frequently he used to use Twitter (NYSE:TWTR), that speaks volumes about his commitment to the app he built.

Accordingly, it’s no wonder users are leaving Truth Social. Many signed up to see content from the former president. Now that he’s seemingly abandoned the app, they have no reason to stay. And as user downloads and signups decline, Trump will have even less motivation to use it.

If this trajectory continues for the app, there will be no further utility to drive DWAC stock. Unless the Trump Media & Technology Group (TMTG) launches a new project soon, DWAC will likely fall as quickly as it rose.

What It Means for DWAC Stock

As Truth Social’s decline pushes DWA stock down, investors should remember that it was always a speculative play. A few weeks ago, InvestorPlace contributor Muslim Farooque argued that DWAC was overvalued and that following the merger, it would continue falling further.

What we’ve seen so far indicates that his assessment was correct. Most of the buzz surrounding the company comes from investor speculation, not hype for the product. Given that Truth Social is a social media platform that thrives on community hype, this does not bode well for the future. DWAC stock has nowhere to go but down unless something drastic changes very soon.

On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Article printed from InvestorPlace Media, https://investorplace.com/2022/03/why-is-digital-world-dwac-stock-down-today/.

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