Trump SPAC DWAC Drops In Value After Large Rise In Social Media News

The social media app will be developed by Trump Media and Technology Group (TMTG).

Raphael Enrique | LightRocket | Getty Images

SPAC shares, linked to Donald Trump’s planned social media platform, fell on Monday afternoon after a significant gain last week. after news of the merger with the company planned by the ex-president on social media.

Digital World Acquisition Corp. only rose slightly earlier Monday, trading about 4% higher on the day before pulling back and up on either side of the “flat” level at around $ 94 a share.

It then dropped 10% just after 2:00 pm ET.

That pace was a major change from last week, when DWAC shares soared from $ 9.96 a share on Wednesday to $ 94.20 a share on Friday – a whopping 845% gain in two days.

The so-called special-purpose purchasing company also showed markedly lower trading volumes.

More than 55 million DWAC shares had changed hands by Monday afternoon, according to FactSet.

Last Thursday, when its price soared more than 350% in a single session, nearly 500 million DWAC shares were sold. DWAC was the most traded name on the NYSE and Nasdaq consolidated listings feed that day.

Another sign that the Trump-instigated craze has subsided, or at least softened slightly, was the share price of adware startup Phunware, which fell 20% on Monday.

The value of Phunware, which participated in Trump’s 2020 re-election campaign, surged 470% on Friday.

There is no indication that DWAC and Phunware have a business relationship. But Phunware’s rally last week coincided with a sharp rally in SPAC shares.

Iceberg Research provided a bearish stance on DWAC on Monday, saying investors face uncertainty in this empty deal as Trump could become the dominant shareholder following the merger.

“Now that the initial hype has passed, we only see risks for investors in the near future. Based on Trump’s track record, at the current price, renegotiation is likely to keep him most of the combined company, ”the seller said on Twitter. … “SPAC holders do not yet own part of this project. Trump has the leverage, not them. “

Despite the lack of fireworks in Monday’s trading, DWAC remained a hot topic in chat rooms with retail traders, who were credited with turning SPAC into the latest hot meme stock in 2021 last week.

According to alternative data provider Quiver Quantitative, the DWAC ticker was the second most popular name on the WallStreetBets Reddit chat room on Monday, just behind Tesla, the electric vehicle giant, whose market capitalization reached $ 1 trillion that day.

One popular post on WallStreetBets on Monday wrote “DWAC-ALL IN”, which received over 500 comments.

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SPACs, also known as Blank Check Companies, are set up to raise capital in public equity markets to use cash to buy or merge with private firms.

Trump’s new social media company, Trump Media & Technology Group, said Wednesday that both DWAC had reached a merger agreement, which would make the former president’s firm go public.

Trump said his as-yet-to-be launched TRUTH Social “stands up to the tyranny of big technology.”

Before announcing last week, Trump delayed by several months his pledge to create a potential rival to social media giants Twitter and Facebook, who banned him for inciting his supporters to riot the January 6 Capitol.

Trump remains controversial, even among hedge funds that would benefit from the soaring DWAC share price.

Last week, at least two DWAC hedge funds – Lighthouse Investment Partners and Saba Capital Management – dumped SPAC shares after learning of plans to merge with Trump’s company.

“Many investors face difficult questions about how to incorporate their values ​​into their work. It was not a serious challenge for us, ”he said. Saba Capital founder Boaz Weinstein wrote in an email quoted by Bloomberg.

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