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Here Is Why DWAC Stock May Be Seriously Undervalued

Former SPAC and Donald Trump-backed Digital World Acquisition Corp could be undervalued relative to the company's future opportunities. Here is what to know.

Digital World Acquisition Corp.  (DWAC)  is a former SPAC consisting of a merger agreement with Trump Media & Technology Group, known also as TMTG. The transaction should close in the first quarter of 2022, when DWAC investors become shareholders in TMTG.

TMTG’s key stated mission is the protection of the First Amendment — i.e. free and democratic speech in America. The company’s two main business segments are social network Truth Social and streaming service TMTG+. Together, they aim at building a "non-cancellable" global community that is independent of the current Big Tech or FAANG group: Meta, Amazon, Apple, Netflix and Google.

The stock became a meme after the frantic surge of over 800% in share price in October 2021. Back then, DWAC’s popularity on the main discussion forums surged when the ticker was associated with the figure of former President Donald Trump.

TMTG is a project that still needs to be properly executed. However, the future opportunities may suggest that DWAC is undervalued today.

Figure 1: Donald Trump, Chairman of Trump Media & Technology Group.

Figure 1: Donald Trump, Chairman of Trump Media & Technology Group.

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TMTG: taking a bite off Big Tech

During his term as President, Donald Trump was accused of violating the policies of the major social networks. He ended up permanently banned from Twitter and Facebook during the reelection campaign.

Even Trump-friendly social media platform Parler took a hit. The app was discontinued from the Apple and Google stores and removed from its AWS cloud platform by host Amazon.

Such moves led Trump Media & Technology Group to develop Truth Social, an self-proclaimed inclusive social network for liberal- and conservative-leaning users that is intended to be a "messenger of American freedom". The company is also working on launching TMTG+, a streaming platform providing everything from news, to sports and entertainment – possibly Trump-styled, featuring shows like The Apprentice and Miss Universe.

TMTG expects to attract 15 million monetizable users for Truth Social as part of the ad-based strategy. The company then hopes to sign up to 10 million subscribers to the TMTG+ platform, feeding the recurring revenue pipeline.

Taking into consideration that Donald Trump had about 89 million followers on his Twitter account and over 57 million followers between Facebook and Instagram, his presence on Truth Social could be a driver of early-stage adoption by a large number of new users.

Truth Social has plans to launch its social media app on February 21 in the App Store, while TMTG+ should come out next — although a launch date has not been set yet.

Truth Social and TMTG+ valuation

Currently, DWAC has a market cap of $3.2 billion at last check. According to the company itself, Truth Social is projected to produce average revenue per user of $13.50 by 2026 and have 81 million users over the next four years – figures based on a poll of registered voters. For reference, Twitter's (TWTR) - Get Twitter, Inc. Report current ARPU is $23.76.

For TMTG+, the company expects the total number of subscribers to reach 40 million by 2026 and an average monthly fee per user of $9 in the next four years. This would represent a 25% discount from Netflix's (NFLX) - Get Netflix, Inc. Report current monthly subscriber fee.

Figure 2: Truth Social and TMTG+ pro forma revenue projections.

Figure 2: Truth Social and TMTG+ pro forma revenue projections.

If TMTG's projections are delivered, based on how the market currently values social media and streaming stocks, fair valuation should exceed the current market cap. Of course, the proof is in the pudding, and Trump’s business initiative still has ways to go.

So, is DWAC undervalued?

It is difficult and maybe too soon to say if Trump Media & Technology Group's opportunities are reflected in DWAC shares price. The first reaction to Trump’s new venture was bullish, maybe in part supported by the former President’s fan base.

But until TMTG is able to execute, speculation and “the meme factor” will likely be the driving forces behind DWAC’s share price movements. Only time will tell if Truth Social will be the new Twitter, a new Parler, or something different altogether.

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Wall Street Memes)