And the Award for Most Dramatic Stock Goes to Digital World Acquisition Corp.

I believe Digital World Acquisition Corp. (NASDAQ:DWAC) will give investors nothing but drama. In fact, if there was an award show for stock performance, DWAC stock would certainly sweep the drama category.

A close-up shot of Donald Trump behind a microphone with one arm outstretched.
Source: Joseph Sohm /

Read the following lines with an unbiased mindset. Yahoo! Finance mentions that “Digital World Acquisition Corp. does not have significant operations. It intends to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses in the technology, SaaS, fintech, or financial services sector in the Americas.”

The essence of this description is in five words. You can probably guess, so kudos to you for noticing the crucial, “does not have significant operations.” That will be the basis for our discussion of DWAC stock today.

What Is DWAC Stock?

Digital World Acquisition Corp is a special purpose acquisition company (SPAC) that announced a planned merger with a social media company backed by former U.S. President Donald Trump.

An SEC filing stated:

“Trump Media & Technology Group and Digital World Acquisition Corp. (NASDAQ: DWAC) have entered into a definitive merger agreement, providing for a business combination that will result in Trump Media & Technology Group becoming a publicly listed company, subject to regulatory and stockholder approval. The transaction values Trump Media & Technology Group at an initial enterprise value of $875 Million, with a potential additional earnout of $825 Million in additional shares (at the valuation they are granted) for a cumulative valuation of up to $1.7 Billion depending on the performance of the stock price post-business combination. Trump Media & Technology Group’s growth plans initially will be funded by DWAC’s cash in trust of $293 Million (assuming no redemptions).”

The goal of this merger is to launch a new social network, named TRUTH Social.

So why do I think DWAC stock will deliver tons of drama to investors? A couple of reasons.

Politics and Business: Not a Good Combination

In the same SEC filing, President Donald J. Trump, the chairman of Trump Media & Technology Group, stated, “I created TRUTH Social and TMTG to stand up to the tyranny of Big Tech. We live in a world where the Taliban has a huge presence on Twitter, yet your favorite American President has been silenced. This is unacceptable. I am excited to send out my first TRUTH on TRUTH Social very soon. TMTG was founded with a mission to give a voice to all. I’m excited to soon begin sharing my thoughts on TRUTH Social and to fight back against Big Tech. Everyone asks me why doesn’t someone stand up to Big Tech? Well, we will be soon!”

The concept of creating a social media network for those silenced or kicked off of other social media networks as an outlet for people to share thoughts, ideas and beliefs is fine. What is not fine is:

  1. Advertising a sustainable business out of a business that doesn’t exist yet. Remember, it’s a SPAC, it doesn’t have significant operations, and we have no objective numbers to guess its value because TRUTH Social also has no financial data.
  2. DWAC stock almost immediately became a meme stock and surged to price levels that are silly, unjustifiable and prone to deflate soon.

DWAC stock has gone from $9.96 at the close on Oct. 20, 2021, to a high of $175.00 on Oct. 22, to a close of $56.25 on Nov. 18. What a rollercoaster.

Make Business Plans Great Again, Not Meme Stocks

WallStreetBets’ founder mentioned DWAC stock and meme trades in a recent article.

“I think it’s clear that this one is next and I think it’s going to be a while before they move on to the next one,” he said. “This is not a short squeeze situation. I believe the move is based off of inherent demand for this thing. There’s a lot of excitement and I think the price speaks for itself.”

I’ve gone on record saying I don’t like meme stocks in the past, and I feel the same way about DWAC stock. Meme stocks do not respect the integrity of capital markets. They rely primarily on stock price manipulation that is, in most cases, short-lived. It’s unsustainable and dangerous. Speaking of, let’s discuss the business model of the TRUTH Social.

First off, Does it Exist?

SPACs generally have a vague business plan. They exist to make an acquisition or a merger within a certain timespan. The thing investors are missing with DWAC stock’s merger is the business doesn’t exist yet. We know nothing about how TRUTH Social will generate revenues, cash flows or add to shareholders’ value. Will there be a subscription fee for users? Will there be an advertising business only to bring revenue? What about any financial projections?

Given the performance of SPAC deals post-merger that invested in companies that actually have some kind of established business, or at least a business plan, it’s no wonder DWAC stock would be relegated to meme stock status. It lives and dies off the sentiment of the meme rally that built it.

Is Trump a Brand Name to Invest In?

This isn’t to say DWAC stock is a total bust. It has one big catalyst. I reckon former President Trump has a brand name that can attract easily capital and investors. After all, he started as a businessman and still is. I would say that it is a strong brand name. In fact, Fortune recently wrote an article titled “Why Donald Trump’s media SPAC could be the ultimate meme stock.”

That said, I believe the idea of distorting prices or artificially inflating trading volume with the intent to mislead market participants by social media is too risky. As I said above, I think DWAC stock could sweep categories if we had a Grammys for stocks, namely drama.

In the month since it announced its merger, DWAC stock has seen a skyrocketing price and a dramatic selloff for a non-existent business, with the only catalyst being a former U.S. president wanting to give a voice everyone. Stay tuned for the next episodes, but prudence says to stay away from the stock.

Until its official launch in 2022 or until TRUTH Social gives us financial insights into its business model, stay away. Investing in a meme stock based on a SPAC merger for a business that doesn’t fundamentally exist is like willingly boarding the Titantic with hindsight. It will not end well.

On the date of publication, Stavros Georgiadis, CFA  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 Publishing Guidelines.

Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.   

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