Trump Media & Technology Group (NASDAQ:DJT) is watching its problems pile up. The newly minted DJT stock hasn’t been able to retain its early momentum. In fact, shares have fallen more than 30% over the past five days — a likely harbinger of worse things to come. Most recently, former President Donald Trump, whose own legal and financial problems are significant, has decided to sue his Truth Social c0-founders in a clear attempt to deprive them of their stakes in the company.
Granted, any stake in TMTG is quickly becoming less and less valuable. But this development threatens to create even more turbulence as the firm continues its uphill battle.
Should investors be concerned about TMTG’s future? If Trump is involved, the answer is yes. Formerly Digital World Acquisition, this name already faced many challenges and merging with TMTG has only made things worse.
What’s Happening With DJT Stock?
So far, having a trading symbol that bears Trump’s initials isn’t helping the newly public company. DJT stock is down today as news of the lawsuit threatens to make matters even more complicated for TMTG. As of this writing, shares are down about 6% for the day.
The two targets of the lawsuit are TMTG co-founders Wes Moss and Andy Litinsky, who are actually former contestants from Trump’s reality show, “The Apprentice.” When the former president’s social media accounts were closed due to his role in the Jan. 6 insurrection, the two pitched Trump on the idea of his own social network.
However, Trump is now alleging that both Moss and Litinsky did such a poor job that neither should have a stake in the company. Bloomberg reports:
“Trump claims Litinsky and Moss failed to properly set up the corporate governance structure of Trump Media, launch his Truth Social platform and find an appropriate merger partner. That failure hurt the company, he argues. He says they then ‘began ceaseless attempts to thwart’ the blank check deal in the struggle for their respective stakes. In their own suit, the two say Trump was planning to seek millions of extra shares, diluting their stake.”
Given Trump’s own history of questionable business dealings, the claims made by Moss and Litinsky seem plausible. After all, the former president spent decades not paying the small businesses he contracted to build his real estate projects. In 2016, a USA Today analysis found that this practice had resulted in 3,500 lawsuits involving Trump for refusal to pay for completed services. With that in mind, Trump wanting to scam his co-founders out of what they’re owed seems perfectly within his MO.
Worse Things to Come
Regardless of how this lawsuit shakes out, the news should remind investors what they get when they buy DJT stock. The company is heavily tied to Trump — and right now, being tied to the former president comes with significant risk. DJT stock also recently fell after the company issued a going concern warning.
TMTG shares recently garnered some meme stock momentum as retail investors flocked to buy in. But so far, that hasn’t been enough to matter and likely won’t be in the near future. There’s incredible uncertainty that comes with being chained to Trump’s wagon, especially when its wheels could fall off at any moment.
On the date of publication, Samuel O’Brient did not hold (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.
