Editor’s Note: This article was updated to include a comment by Fox News.
Digital World Acquisition (NASDAQ:DWAC) stock rallied on a rumor that Fox Corporation’s (NASDAQ:FOX) Fox News joined Truth Social. Truth Social is part of former President Donald Trump’s Trump Media & Technology Group, which has agreed to merge with Digital World. While today’s rumors were certainly very positive for Truth Social and DWAC stock, I do not recommend buying its shares at this point.
Fox News is by far the most popular right-leaning media outlet in the U.S. Just during the week of Feb. 7, for example, it attracted nearly 2.4 million primetime viewers, more than double the total audience of Comcast’s (NASDAQ:CMCSA) MSNBC during the same week and more than four times as many as Warner Bros. Discovery’s (NASDAQ:DISCA) CNN during that week.
Fox News’ status among Republicans is generally favorable. According to a poll carried out by Morning Consult in February, nearly 70% of Republicans found the channel “credible.” And as we’ve seen, the channel has a very large audience. If speculation comes to pass, Fox News could help Truth Social by attracting a portion of its fans to the app.
However, a Fox News spokesperson told InvestorPlace that Fox News “has not joined the platform Truth Social.”
Regardless, I still think DWAC stock is too risky right now. In a past column on Digital World, I noted that Truth Social had reportedly experienced multiple technical problems during its launch. I haven’t seen any evidence yet suggesting these issues have been eliminated.
What’s making me more apprehensive about DWAC stock is the number of downloads of the Truth Social app has reportedly plunged in recent weeks. Plus, two high-level executives recently left the project.
I still believe Truth Social can overcome its difficulties and become very successful. Indeed, there have been multiple concrete signs of its tremendous potential. Specifically, when it first became available, it was the most-downloaded app in Apple’s (NASDAQ:AAPL) App store. Multiple conservative pundits have said they have seen more engagement with their posts on the app than on Twitter (NYSE:TWTR).
Still, given Truth Social’s technical issues and the other bad news that has emerged in recent days, DWAC stock is too risky to buy right now.
On the date of publication, Larry Ramer 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.