When former President Donald Trump won the presidential election six years ago, many pollsters pointed to Twitter (TWTR) – Get Twitter, Inc. Report as a major factor.
Trump, who made tweeting without supervision a centerpiece of his days in office, repeatedly complained about bias on the microblogging service.
He was eventually suspended from Twitter in the wake of the Jan. 6 insurrection “due to the risk of further incitement to violence.”
He has since attempted, with varying degrees of success, to create competing social media sites that closely resemble Twitter and Facebook’s features.
Trump officially launched his own social media venture via a special purpose acquisition company, Digital World Acquisition Corp (DWAC) that started trading in October 2021.
Should Truth Social Investors Be Concerned?
Ever since news of Twitter and Tesla (TSLA) – Get Tesla Inc Report Chief Executive Elon Musk’s potential takeover began at the beginning of April, interest in Trump’s return to his favorite pastime of tweeting has reached a fever pitch.
But the narrative has meant mounting losses for investors that backed Trump’s Digital World Acquisition Corp, which was slated to eventually merge with Truth Social.
Since April 4, the day Musk first revealed a nearly 10% stake in Twitter, Digital World Acquisition’s value has plummeted 44%.
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It is down more than 65% since a March 4 peak after the regulators began eyeing the deal, and some pundits have questioned if it will ever be able to merge with Truth Social at all.
The Truth Social app itself has had problems logging in users, showing content and displaying error messages.
The company has also seen an exodus of top talent, which has accelerated as Musk’s overtures to Twitter intensified.
Initial filings with the Securities and Exchange Commission showed Trump taking a more than 50% stake in the SPAC.
A more detailed prospectus of who owns what among a consortium of institutional investors and private investment in public equity (PIPE) stakeholders will show who exactly is losing how much money on DWAC’s nosedive.
Twitter May Be Truth Social’s Death Knell
The company has continued to skid now that Twitter’s deal with Musk has been inked.
On April 26, a day after the official takeover was announced, DWAC shares plunged as much as 20% in the afternoon immediately following the announcement.
The $44 billion Musk/Twitter deal is likely to cause even more headaches for the already-struggling SPAC and Truth Social, if not outright spell its demise.
“Twitter becoming open to a bigger variety of voices is likely to be the last nail in the coffin of Truth Social’s SPAC,” AlphaTrAI Chief Investment Officer Max Gokhman told Bloomberg.
“It’s hard to see any upside for them given all of the internal struggles with even launching a scalable social platform and now the likelihood that Twitter will allow a broader range of discourse,” added Gokham.