Avoid Digital World Acquisition as Truth Social Loses Momentum

  • After a burst of initial interest, Digital World Acquisition’s (DWAC) merger partner, Trump Media & Technology Group, is losing momentum in its Truth Social app
  • As Donald Trump seems to have lost interest, there’s been much less activity on the site
  • Apart from the Truth Social app, there is little in the TMTG portfolio that will excite investors
dwac stock: the Truth Social logo is seen displayed on a smartphone being held in front of an app store showing the app Truth Social

Source: rafapress / Shutterstock

The Truth Social app launch has failed to impress, which will dent Digital World Acquisition (NASDAQ:DWAC). Due to the nature of DWAC stock, it is very sensitive to positive or negative news.

Although there are some worries about former President Donald Trump’s effects on social media, you have to take that risk when you start investing in this field. But so far, there’s no indication the company won’t be big in the future, so I would still recommend holding this one as a long-term investment.

DWAC Digital World Acquisition $64.98

The Latest in DWAC Stock

That said, near-term catalysts are definitely in play. As is the case with most special purpose acquisition companies (SPACs), once the merger settles and the lock-up period expires, you see a steep drop off in the price of shares.

Interestingly, certain companies have bucked this trend — like Black Rifle Coffee (NYSE:BRCC), a coffee chain targeting a conservative clientele. But the overall trend suggests the stock will rapidly lose market value in the coming weeks.

We may have the social media giants we know, but recent changes to policies on the platforms have left some users searching for an alternative. Therefore, there is a huge total addressable market out there. Even if a company manages to get just a slice of the action, things will start moving in the right direction.

So, what should you do now? The best course of action is trimming your holdings and then waiting for shares to fall substantially before buying back.

Truth Social Slows After an Initial Spike

There are several offerings from Trump Media & Technology Group (TMTG), but Truth Social is the group’s biggest star. When the app was released in February, people were lining up to get it. But many encountered technical issues when they downloaded it, and the company put them on a waitlist.

Things seem to have improved since then. But according to a report from The Daily Beast, the app’s usage is declining. There was a lot of buzz about the website’s launch, and for some period, it had around 2 million daily visitors. But now, an average of only 300,000 people visit the site every day.

Meanwhile, there are some concerns about Trump’s behavior on Truth Social. He has not been very active, and some believe he has lost interest in it. The issue is the platform needs Trump to succeed. Plus, there are already plenty of other social media sites that cater to conservative users.

Additionally, the same Daily Beast article alluded to a problem with the app’s overall performance and the negative press it has generated. There’s undoubtedly some trouble in paradise.

TMTG Ambitions and Sobering Reality

It’s easy to forget TMTG has several other projects. It believes it will have 121 million monetizable users by 2026 and $3.6 billion in revenue.

Its TMTG Plus streaming service will be its biggest source of revenue. Again, we do not have much information regarding this product and how it intends to differentiate itself. The one positive, though, is the enterprise is being led by veteran television producer Scott St. John.

However, that brings us to another subject of contention. Former Congressman Devin Nunes is the CEO of TMTG. His experience is primarily in agriculture, not technology and media. That will become an issue as the company grows. Some people are also skeptical of the company’s location in Florida rather than Silicon Valley.

I’ll confess I am not 100% confident TMTG will grow into a profitable business. There are several issues that need to be fixed for the company to grow.

DWAC Stock Is a Risky Play

Many investors are turning to safer investments due to a rise in interest rates, various geopolitical factors and the possibility of a recession. It’s tough to give a buy rating to DWAC stock in such an environment.

It’s hard to say if TMTG will be worth its current value because it wants to focus on cloud and streaming efforts, which both require significant investment.

This is why DWAC stock can be dangerous. Negative news releases will have a devastating effect on its shares. Therefore, it’s best to steer clear of it right now. Instead, take advantage of its prior rallies and take profits.

On the publication date, Faizan Farooque did not have (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.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.


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