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DWAC Stock: Why Is It So Volatile?

Former President Donald Trump is expected to launch his 2024 bid on November 15. Here's what investors need to know about the SPAC intended to take his company public.
  • DWAC stock recently soared on the possibility of former President Trump running for another term in 2024.
  • DWAC has repeatedly postponed a crucial shareholder vote that give its planned merger with Trump Media and Technology Group a one-year extension.
  • DWAC needs the vote of 65% of its shareholders to postpone the merger again and to prevent the SPAC from being liquidated.
Figure 1: DWAC Stock: Why Is It So Volatile?

Figure 1: DWAC Stock: Why Is It So Volatile?

The Hyped-up Trump SPAC

Digital World Acquisition Corp.  (DWAC)  is a special purpose acquisition company (SPAC). DWAC's main goal is to merge with Trump Media and Technology Group (TMTG), thus taking it public.

Should the merger go according to plan, all DWAC investors will become shareholders of TMTG. The Trump company's two main business segments are an existing social network, Truth Social, and a planned streaming service, TMTG+.

However, since the SPAC's launch, DWAC has become a meme stock, trading more on speculation than on its actual intrinsic value. In fact, some could say that there is pretty much zero value to DWAC, because its TMTG merger has been repeatedly postponed.

Shares of DWAC jumped 800% in October 2021 but have since lost more than 76%.

Mark Your Calendars for November 15

Over the past year, DWAC has been trading on news linked to Donald Trump. Recently, DWAC shares shot up over 70% on the possibility of a new run for the White House by the former president.

The latest news is that Trump will make a big announcement on November 15 at his Mar-a-Lago resort. It's widely expected that Trump will use that day to launch another presidential campaign.

Considering DWAC's speculative history, it's likely the SPAC's shares will be very volatile until Trump's "big announcement." For investors or traders willing to capitalize on risk — as well as the Trump name — this could be a good opportunity.

But there's another news item that recently impacted DWAC shares: Elon Musk's purchase of Twitter   (TWTR) - Get Free Report. Following the takeover, shares of DWAC rose nearly 15% in a single trading session.

The Tesla   (TSLA) - Get Free Report CEO has already made significant changes to the company's structure. This has had a positive impact on DWAC shares — even though Twitter's "free speech" focus make it more popular among right-wing social media users than Truth Social.

Musk has already signaled the re-inclusion of banned Twitter users, including Donald Trump. However, the former president said he doesn't plan to return to Twitter. He said:

"I am staying on Truth. I like it better, I like the way it works. I like Elon, but I'm staying on Truth."

Is DWAC Destined for Liquidation?

DWAC has repeatedly postponed the deadline for its merger with TMTG — four times, to be exact.

Unless 65% of shareholders vote to extend the merger again, the SPAC could liquidate. In that case, all initial public offering (IPO) proceeds would be returned to public shareholders.

In September, the SPAC failed to acquire the necessary shareholder support to extend the merger deadline for another year. Since then, the extension vote has been postponed monthly — most recently at the November 3 meeting.

At this meeting, DWAC CEO Patrick Orlando adjourned the shareholder meeting until November 22, giving stockholders additional time to cast their votes.

It's worth noting that both DWAC and Trump Media are under federal investigation for possible securities violations. Trump himself is in hot water thanks to a high-profile Department of Justice investigation into improperly stored classified documents.

However, as Trump signaled, even if the merger doesn't happen, TMTG will move forward. "If they don't come with the financing, I'll have it private," Trump said. "Easy to have it private."