Former President Donald Trump continues to dominate headlines despite leaving the White House. His new company, Trump Media & Technology Group (TMTG), recently announced its plans to merge with special-purpose acquisition company (SPAC) Digital World Acquisition Corp (NASDAQ:DWAC). DWAC soared as much as 400% the following day. Interestingly, penny stocks connected to the merger are also doing well.
Essentially, SPACs are blank check companies that are investment vehicles looking for startups to take public. With limited paperwork and financial requirements, it is a less taxing way to list shares.
Due to regulatory pressure, activity in the space has been slowing down. But news of the mega-merger is too good for the markets to ignore. Trump is kickstarting a project called Truth Social, which he claims will “stand up to the tyranny of Big Tech.”
Regardless of what you think of the merger and the former President, related penny stocks in social media and tech are surging. Some of them are relatively new players, and others are established enterprises. These penny stocks look poised for quick gains from the merger:
- Salem Media Group (NASDAQ:SALM)
- Grom Social Enterprises (NASDAQ:GROM)
- Phunware (NASDAQ:PHUN)
- Creatd (NASDAQ:CRTD)
- Izea (NASDAQ:IZEA)
- GreenPro Capital Corp. (NASDAQ:GRNQ)
- NextPlay Technologies (NASDAQ:NXTP)
Penny Stocks: Salem Media Group (SALM)
Salem Media Group describes itself as a family-friendly company catering to audiences interested in Christian values. It operates its brand under two umbrellas: Salem Christian Media for religious topics and Salem Conservative Media for political issues.
Salem Media estimates that it has 11 million radio listeners and is logging 153 million hits through its website and application. It also has 40 million active email addresses on file, a treasure trove of data.
During the 2020 election season, the media giant delivered information through the lens of conservative politics. It viewed itself as a counterweight to mainstream media.
Ultimately, Salem’s right-leaning discussions and Christian-focused content have delivered for them. Through several mergers and acquisitions, it has built up a sizeable empire, helping it become a conservative media giant. Salem has courted several prominent conservative names such as Larry Elder and Mike Gallagher to compete with iHeartMedia’s (NASDAQ:IHRT) iHeartRadio and Cumulus Media’s (NASDAQ:CMLS) Westwood One. All of this has added up to a very successful business model.
The company recently released its results for the third quarter. The earnings mark the sixth quarter, on the trot, in which Salem comfortably beat analyst expectations. Quarterly income increased a whopping 6,615% to $22.1 million from the year-ago period. Operating income also dramatically grew by 232%.
However, although the numbers are excellent, they do not explain the connection to President Trump. For that, you have to go back to President Trump’s time in office. One of Salem’s network hosts, Dr. Sebastian Gorka, served in his administration. In July, Salem Media signed an extension for his program, America First with Sebastian Gorka.
Grom Social Enterprises (GROM)
Social media has emerged as a major investing theme since the DWAC Trump SPAC announcement. The whole idea behind the former President’s latest initiative is to create an alternative social media platform.
However, in this case, a rising tide does not lift all boats. Meta (NASDAQ:FB), formerly Facebook, and Twitter (NYSE:TWTR) banned Trump after the insurrection riots at the U.S. Capitol. Therefore, any positive price momentum you see for Twitter or Meta has little to do with the recent merger agreement.
But the tie-up will lead to positive momentum for smaller platforms. A great example is Grom Social, a social media site for kids.
Interacting on social media can be daunting for some children. Grom Social provides them a safe space to enter, explore and learn about this exciting world. It was created in 2012 by Zach Marks, who was inspired by his own experiences with social media.
Being an eager 11-year-old, Marks created a Facebook profile without informing his parents. When they found out and made him delete that account, he thought about making a social network designed for kids like himself. Consequently, he came up with Grom.
The platform offers everything a child could ask for from social media, including curated kid-friendly shows, messaging services and photo/video editing. The company is a big hit, signing up more than 25 million kids and parents since 2015.
However, despite its success, Grom is not resting on its laurels. It has acquired studios like Top Draw Animation and Curiosity Ink Media. Additionally, it recently inked a deal with Toon2Tango to expand its content.
Penny Stocks: Phunware (PHUN)
Phunware is a small-cap software developer in Austin, Texas that produces applications for the advertising and marketing industries. Amid the Digital World SPAC hype, shares had a two-day gain of as much as 2,189%.
Last year, the software company partnered with American Made Media Consultants for “the development, launch and ongoing management and evolution of the Trump-Pence 2020 Reelection Campaign’s mobile application portfolio on Apple iOS and Google Android smartphones.”
It is not clear Phunware will have anything to do with developing the Truth Social app. However, due to its prior connection with Trump, the stock will likely rise as the DWAC story develops.
When news of the deal broke, approximately 106 million Phunware shares were traded in response. Just days prior, it traded about 3 million shares. This indicates investors are excited for what’s coming next.
However, it is important to temper your excitement. Last year, Phunware agreed to pay $4.5 million to Uber (NYSE:UBER) as part of an agreement over claims of fraudulent advertising. And earlier this year, there was a risk of the company being delisted from the Nasdaq exchange.
However, Phunware was very successful during the 2020 election cycle, with American Made Media Consultants being one of the company’s biggest clients. By July, it accounted for 30% of all sales and paid Phunware more than $1.6 million for the first half of the year.
The campaign was ultimately unsuccessful. However, Phunware’s data strategies are very much alive and can be used for multiple purposes, like fundraising, stoking Trump’s base or building an audience for a new social media enterprise.
Creatd is a social media marketing company that concentrates on digital content creation. It also owns several other businesses, including Vocal and OG Gallery. The latter provides an online platform for artists to showcase their work and accepts non-fungible tokens (NFTs) directly from buyers through blockchain technology.
Interestingly, one of the reasons Creatd is doing well has nothing to do with its operations. Mike Lindell, CEO of My Pillow and a supporter of Trump, recently filed paperwork to launch his own social media network called Vocl.
The name bears a striking resemblance to Creatd’s Vocal. As a result, the company warned Lindell to alter the name of Vocl.com and forfeit ownership of the domain name. In response, the My Pillow CEO renamed the social media site to Frank.
However, this does not mean Creatd has no ties to the former President. Its latest NFT drop, “The Trump Photographs,” depicts a young Donald J. Trump. Creatd purchased the media assets from creditors of Bob Guccione, a media executive who once ran magazines like Penthouse and OMNI. You can pick up one of these NFTs at an astronomical 240 Ethereum (CCC:ETH-USD).
Penny Stocks: Izea (IZEA)
Izea is a company that specializes in technology to enhance influencer marketing, content creation and collaboration. Users can monetize their work by leveraging its innovative platform, which has facilitated nearly 4 million transactions between buyers and sellers since its creation.
Two months ago, it inked a deal with DatChat (NASDAQ:DATS), the only social media and messaging platform focused solely on privacy. This partnership will allow them to execute an influencer-driven online dating campaign for their users exclusively through DatChat’s messenger app.
IZEA stock experienced positive momentum, in part due to sympathy sentiment for privacy and free speech.
Aside from the Trump-related emotion, Izea itself has done very well. In the third quarter, revenue has grown 88% to a record $7.6 million compared to $4 million in the year-ago period. The Izea software-as-a-service platform hit a record count of customer licensing this year.
Managed services bookings jumped 181% year-over-year (YOY) to reach $11.3 million, another record for the company. However, while the top line grew by 88%, total costs and expenses rose 72% to $9.1 million.
It’s understandable since the company is at a nascent stage and needs to spend on marketing. Lower overall margins will be part and parcel in the coming few quarters. Keep that in mind if you are thinking of buying and holding this one.
GreenPro Capital Corp. (GRNQ)
GreenPro Capital is heavily involved in the hottest investment segments, decentralized finance (DeFi) and financial technology (fintech). Additionally, NFT penny stocks have done very well in the wake of the merger announcement — and like other companies in the NFT space, GreenPro has a finger in every pie.
Recently, the company spun off SEATech Ventures Corp. (OTCMKTS:SEAV), an OTC-listed subsidiary with investments. It is now focusing primarily on digital currency exchanges—a move aimed at ensuring the company’s long-term viability.
GreenPro is also active in the NFT market. It has purchased thousands of Sputnik satellite-themed tokens earlier this year. As the digital art market has taken off, investors have flocked to NFT-related stocks.
The company is also planning for a Low Earth Orbit (LEO) satellite communication project that will serve the internet needs of the South East Asia region. Remote islands in Borneo and other isolated areas would benefit tremendously from this future LEO network, which the company hopes to deliver soon.
All of these developments have led to an exponential increase in the stock’s price. The company is looking to take advantage of this movement by filing for a mixed shelf of up to $20 million.
Stock dilution is a strategy that reduces the value of your company’s stock by issuing new shares. The process often occurs when companies want to raise money or pay dividends. For a new company like GreenPro, it is the lifeblood for operations, especially when the stock price has positive momentum. Hence, invest in these companies with a short-term perspective.
Penny Stocks: NextPlay Technologies (NXTP)
NextPlay is a company on the cutting edge of technology. With offices around the world, it provides gaming and advertising solutions for both consumers and companies alike.
It is also involved in fintech verticals, including AI-based investment banks or crypto banking. NXTP stock is worth keeping an eye on if you’re looking for diversity within your portfolio and unique opportunities at every turn.
The company reported revenue of $2.6 million at the end of Q2 2022, compared to none in the year-ago quarter. Gross profit came in at $1.4 million with a consolidated gross margin of 51.9%. Nextplay’s cash position at the end of the fiscal quarter equaled $8.9 million compared to $445,000 in the prior quarter.
CEO Bill Kerby made a statement regarding the company’s second quarter of fiscal 2022. He said they had “transformed our business through several highly-synergistic acquisitions, and laid the foundation for future growth” by recording record revenues that are expected to “more than double in the current quarter as all of these acquisitions contribute fully.”
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On the publication date, Faizan Farooque did not have (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.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.