It’s been 19 months since Trump Media and Technology Group (TMTG) and Digital World Acquisition (NASDAQ:DWAC) announced they were merging to form a media colossus to gather subscribers for its Truth Social stock social media platform. Along the way, the DWAC shot would hit an all-time high of $101.87 on March 2, 2022. Unfortunately, it’s been downhill ever since, losing 87% of its value over the past 13 months. 

If you read Bill Browder’s second book, Freezing Order, you’ll understand why DWAC is losing altitude. Donald Trump has never been a wise person. There’s no reason why he should start this late in life. I find it amazing that there are nearly 4,900 stocks listed on the NYSE and Nasdaq, and yet thousands, if not millions, of retail investors own shares in this special-purpose acquisition company. Mind-boggling

By comparison, investing in AMC Entertainment (NYSE:AMC) seems like a brilliant idea. At least people like to go to the movies. But, unfortunately, Trump’s latest endeavor provides little value to people. That being said, I believe it’s only a matter of time before Trump’s Truth Social stock goes to zero. 

Twitter is a Disaster

Truth Social was initially pitched as the anti-Twitter. It would be “a major new platform” that would eliminate woke attitudes on more liberal social media platforms. I suppose there’s an element of truth, but the key to any successful business is execution. You can have a terrible idea that, properly executed, can make money. However, the best ideas will fall flat if the rollout is a shambles.

Truth Social was that from the get-go. It currently has approximately two million monthly active users (MAUs). Twitter has 165x as many MAUs as Truth Social. Yet, it’s struggling to break even. Musk stated in March that the billions of dollars in cost cuts were necessary to keep it from going bankrupt and could lead to positive cash flow by the second quarter. Whatever happens to Twitter, it’s hard to imagine worse things not happening to Truth Social with so few users.

DWAC Loses Its CEO

It has been so long since I’ve followed DWAC that I did not even realize CEO Patrick Orlando was fired in March. Not a big surprise. 

Here’s what I said about Orlando’s background in Dec. 2021: “It all looks good on paper, but it doesn’t mean squat when it comes to assessing the strengths and weaknesses of a potential merger candidate. The closest Orlando gets to dirtying his hands is a stint as CFO for a wholesale sugar merchant,” I wrote on Dec. 16, 2021. 

Fast forward to 2023 and Orlando’s dismissal. Digital World’s announcement suggested that a new leadership team was needed to instill confidence in investors. Yet, it allowed Orlando to remain on the board. That’s merely switching around the deck chairs on the Titanic. 

If it wants to make a move to instill confidence, Devin Nunes, CEO of Truth Social parent TMTG, should be made to walk the plank. Donald Trump likely handpicked his appointment as CEO of Truth Social. Until Nunes is gone, Truth Social has no hope.

Little Institutional Investment

One way that stock prices move higher is through institutional buying. Sure, there have been incidents like the AMC meme run in 2021, where retail investors did most of the work. But, generally, a significant institutional buy-in does the trick for most growth businesses.  

DWAC has approximately 6% institutional ownership. However, there is some hope. Of a group of seven large tech stocks, including Tesla (NASDAQ:TSLA), it has the highest percentage of retail investors at 44%. The lowest of the seven is Netflix (NASDAQ:NFLX) at 5%. 

“Higher retail ownership can result in more stock volatility. Retail investors tend to trade more than institutional investors that build and sell positions more slowly,” stated a Barron’s article from March.  I mean, 44% isn’t the same as 94%, but it’s unusually high. That says a lot about the loyalty of Tesla supporters. I suspect it says the same about Trump supporters. But, of course, TSLA is an investment rather than an ill-founded desire to worship the man.

Why Support a Company Whose Main Asset Is an Indicted Former President?

The DWAC share price jumped on March 31 after it was revealed that Trump would be indicted on 30 counts related to business fraud. The actual number turned out to be 34. They were all felony counts, no misdemeanors. Trump pleaded not guilty to all of the counts. 

There is the argument that Trump supporters who’ve remained silent and avoided Truth Social until now will flock to the social media platform to support their fearless leader. Or Digital World getting cleared of any issues related to nonpayment of Nasdaq fees had investors less fearful it would be kicked off the exchange. 

InvestorPlace’s Samuel O’Brient recently discussed why the indictment didn’t make DWAC stock a buy. My colleague argued that good Trump news isn’t the same as good DWAC news. Further, if, for some reason, Trump is unable to run for President because he’s dealing with his legal troubles, that would sink DWAC stock. I couldn’t agree more. 

There’s a saying, “Where there’s smoke, there’s fire.” This is only the beginning for Trump, legally speaking. Intelligent investors usually walk away from businesses facing significant uncertainty. Truth Social is at DEFCON 1.

Truth Social Has Little Revenue and Cutting Staff

In March, TMTG laid off six of its staff, including Chief Technology Officer William Lawson. Many tech-related businesses are doing this, so it can’t be considered an absolute dealbreaker. Sources say TMTG has enough cash to operate until September. The cuts were essential to its survival. However, Lawson was the company’s third CTO. Even if engagement at Truth Social recovers some of its users lost over the past year, it won’t be nearly ready to become a public company. The paperwork with the Securities and Exchange Commission will bury it alive. 

As Bloomberg reported, Truth Social’s website and desktop visits have fallen by half in less than eight months, from 11.5 million in August 2022, to 5.7 million in Feb. It would never be easy for Truth Social to generate revenue from legitimate businesses. Now that Trump’s indicted, what Chief Marketing Officer, except maybe the My Pillow CMO, will allocate any money to it? Very few.  

TMTG will have a tough time raising funds in the future making it very difficult to grow.

It May Never Go Public

In Nov. 2022, at least 65% of DWAC shareholders approved the delay of its merger deadline to Sept., giving it an additional nine months to complete the combination with TMTG. If Sept. comes and there’s no merger, there’s a real possibility that investors won’t vote for another extension. It’s especially true if Manhattan District Attorney Alvin Bragg lays any more charges. 

In Sept. 2022, Patrick Orlando invested $3 million into DWAC to ensure it wasn’t liquidated. He might not be CEO now, but he’s got a vested interest in seeing this through to completion. 

The New York Times recently reported that the SEC and federal investigators are investigating two aspects of the merger agreement. First, preliminary discussions between the two groups violated securities laws. Secondly, some of DWAC’s early investors, brought in by Orlando, made improper trades of its stock. Trump Media executives feel the SEC is purposely delaying their investigations to scuttle the merger. They think the agency has a bias against Trump. Yes, a bias to limiting the number of bad actors participating on Wall Street.

Trump’s 76

My last point is my most obvious. 

Trump was 45 when he put his first company, the Taj Mahal Casino, into Chapter 11. He went on to bankrupt five others, the most recent being the Plaza Hotel in New York, which went bankrupt in 1992, four years after buying it. 

“Trump got into trouble in Atlantic City because he didn’t know when to stop. Casinos were profitable where he bought his first two, the Plaza and the Castle. But as casinos proliferated in Atlantic City, the market got saturated and profit margins plunged,” stated Yahoo Finance Senior Columnist Rick Newman in Oct. 2020. 

His 40s were not a good time for employees of his various casinos because many of them lost their jobs. Thirty years later, he’s given up operating businesses, focusing on licensing the Trump name. Weirdly, that was probably his best decision. Rarely do businesses that focus on a charismatic leader carry on after that leader is gone. Trump has health issues like all people in their mid-to-late 70s. Should he pass away or be incapacitated, who will be the face of Truth Social? Donald Trump Jr.? I highly doubt it. 

This is the most significant risk of owning DWAC stock.   

On the date of publication, Will Ashworth 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.