Special purpose acquisition company (SPAC) Digital World Acquisition (NASDAQ:DWAC) is on a healthy up-trend today after revealing intent to raise $1 billion dollars in private funding ahead of its merger with Trump Media and Technology Group. DWAC stock gained 7% Wednesday on the news before jumping more than 24% in after-hours trading. Currently, DWAC is up more than 6% today, as it appears the momentum carried through the night.
Former President Donald Trump is launching his own social media app: Truth Social. After Trump’s sweeping social media bans in January, his revenge appears imminent. The app is reportedly just one component of the newly formed Trump Media and Technology Group. It gets even more elaborate; the app will feature a subscription-based on-demand video service. TMTG+ will be its premier premium service, containing entertainment, news and other content. Truth Social is scheduled for a Q1 2022 release.
That’s where Digital World comes in. Trump announced the partnership with the SPAC in October, as part of an increasingly fashionable trend toward SPAC initial public offerings (IPOs). Digital World is a “blank check” company, meaning it doesn’t functionally do anything. SPACs are publicly traded companies whose value is entirely based on the future prospect of merging, and subsequently taking public, an investor-approved private company. In this case, the investor-approved private company is Trump Media.
While there are many unknowns about the merger, funding seems to be the primary area of concern for Trump and Digital World.
What Are the Future Prospects for DWAC Stock?
After announcing the SPAC deal in October, DWAC stock notoriously rose by unprecedented margins: from less than $10 per share on Oct. 11 to its all-time high of $94 just a week later. The move made waves for SPACs up and down the trending tickers list. It’s worth noting, however, that the announcement didn’t disclose a timeline for when the merger will go through. Instead, it focused on its $1.7 billion valuation.
So, what’s happening with its current attempt to garner additional funding?
In the original deal between Digital World and Trump Media, DWAC shares were valued at $10 each. As it’s currently sitting around $48, Trump Media is attempting to lock in a private investment in public equity (PIPE) that would allow DWAC stock to more closely mirror it’s current value whenever the merger takes place. Trump Media is already set to receive $293 million upon completion of the merger; this additional funding would only push its valuation higher. Consequently, it should earn a valuation close to $3 billion if it achieves its $1 billion PIPE goal.
A PIPE deal could allow Digital World stock to be valued at “a 20% discount of its 10-day, volume-weighted average price,” according to anonymous sources from Reuters. According to the same sources, Trump has been personally contacting investors and hedge funds. Indeed, he’s even hosting road show demos of the social media app, in an attempt to gain funding.
Only time — and DWAC stock prices — will tell us if the former president is successful.
On the date of publication, Shrey Dua 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.
