Trump Media & Technology Group (NASDAQ:DJT) is currently experiencing a rough patch, with its stock plummeting over 30% in the past five days. This downward trend could be indicative of further problems on the horizon, given former President Donald Trump’s recent decision to file a lawsuit against Truth Social co-founders Wes Moss and Andy Litinsky, aiming to strip them of their company stakes. This situation could potentially introduce more instability for TMTG, which is already battling various challenges.
Investors may have valid concerns about the future of TMTG, particularly with Trump’s involvement. The company, previously identified as Digital World Acquisition, had faced numerous obstacles prior to the merger with TMTG. The fact that the trading symbol includes Trump’s initials hasn’t helped the now public company, with DJT stock dropping around 6% for the day as the lawsuit news adds to the complexity.
Moss and Litinsky, the lawsuit’s targets, are alumni of Trump’s reality show “The Apprentice.” They proposed a social network concept to Trump following the closure of his social media accounts, which were linked to his involvement in the Jan. 6 insurrection. Yet, Trump alleges their performance was so inadequate that neither should hold a stake in the company.
According to reports, “Trump accuses Litinsky and Moss of failing to establish the corporate governance structure of Trump Media adequately, launch his Truth Social platform, and identify a suitable merger partner. He argues that their failure harmed the company and claims they then ‘initiated relentless attempts to obstruct’ the deal in the fight for their respective stakes. In their lawsuit, the pair allege Trump intended to request millions of additional shares, diluting their stake.”
Considering Trump’s track record of dubious business dealings, the allegations made by Moss and Litinsky seem credible. Trump has been embroiled in 3,500 lawsuits over his refusal to pay for completed services, as per a 2016 analysis. This pattern suggests that attempting to defraud his co-founders of their stakes is not inconsistent with the former president’s behavior.
This lawsuit serves as a cautionary tale for investors contemplating purchasing DJT stock. The company is closely linked with Trump, and any association with him carries significant risk. DJT stock also recently took a hit after the company issued a warning concerning its financial stability.
While TMTG shares have experienced some meme stock momentum as retail investors rushed to buy in, this hasn’t been enough to make a substantial impact and likely won’t be in the foreseeable future. The uncertainty associated with being tied to Trump’s ventures is significant, especially considering the possibility of sudden collapse.
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