Digital World Acquisition Corp Is a Big Buy With a Big ‘If’

When it comes to former President Donald Trump, it’s difficult to set aside personal emotions with any venture he’s involved in. Of course, the latest opportunity related to “The Donald” is – what else? – a special purpose acquisition company in the form of Digital World Acquisition Corp (NASDAQ:DWAC). I must say, though, I’m a bit surprised that DWAC stock is a Nasdaq-listed entity.

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

I can hear him now. Yes, I have a SPAC. It’s the greatest SPAC in the world, listed on the biggest stock exchange in the world. Except that the New York Stock Exchange is the biggest by market capitalization, but let’s not let facts get in the way of a good narrative.

Seriously, though, I’m a supporter of DWAC stock if the business combination successfully completes. As you know, the SPAC will attempt to make Trump Media & Technology Group (TMTG) a publicly traded company. Undergirding TMTG is Truth Social, a censorship-free social media platform designed to take on the bigwigs of big tech.

Personally, just the sole idea of a conservative-leaning social network might not be enough for DWAC stock. While platforms like YouTube crack down on ideologically objectionable content, it’s possible to cloak your offensive content through code words. If you really want to find extreme right-wing content on the majors, you can.

So no, Truth Social will not be a unique outlet. Rather, I like the investment proposition of DWAC stock because millions of Americans are angry. And while you may not agree with that anger or the reasons for it, it certainly has lucrative potential.

I’ve mentioned this before. If evangelicalism was a stock, why wouldn’t you buy it? Belief and the countering of belief is a huge phenomenon in the U.S. (and perhaps abroad).

DWAC Stock and the Worrying ‘If’

So if everything goes smoothly with the reverse merger, I would be very interested in DWAC stock. I might even acquire some shares – and I’m not kidding about that. However, recent developments have put a damper on my enthusiasm.

For those who haven’t read it, I highly recommend Judd Legum’s article covering DWAC stock for Popular Information. As you likely know, the so-called Trump SPAC is under investigation. The Securities and Exchange Commission is attempting to ascertain what communications were made prior to the merger announcement.

For a brief recap, SPACs usually have two years to identify and merge with a private enterprise. The allure and the risk of these blank-check firms is that no one knows what company a SPAC is seeking to merge with until the announcement. Therefore, if there was already an agreement before the SPAC went public, that’s a major violation of the rules.

Well, that’s the problem that Legum discussed. As is normal for SPACs, DWAC’s initial public offering disclosure stated that it had not yet identified a merger target.

Multiple media outlets, however, reported that DWAC CEO Patrick Orlando was involved in discussions with Trump months before DWAC began trading. The SEC is now seeking information “about [DWAC’s] trading policies and communications between the SPAC and Mr. Trump’s company.”

If the investigation determines that the deal between DWAC and TMTG was agreed to in advance, DWAC’s SEC filing could be considered “false or misleading with respect to [a] material fact.” That could be a violation of federal securities laws.

That’s not a white lie, like the coronavirus fading away when the summer season hits. If there was already an agreement to merge, this is a massive violation of the principles of shell companies.

Welcome to SPACs

I suppose the irony in all this is that, from many retail investors’ perspective, SPACs have no principles. Sure, they allow the average Joe or Jane to participate in a form of private-equity opportunities. But without knowing what they’re getting involved in, it’s a blind bet on the sponsors to not only find a deal but a good one.

That’s why the alleged “pre-IPO discussions” are so maddening. No one’s supposed to know what the merger might be. It’s just not fair to the investors. But yet another irony is that in this (again allegedly) unprincipled and unethical dealing, DWAC stock is not only a good SPAC but a great one.

Yes, Mr. President, it might even be the greatest SPAC ever in the biggest exchange ever (if we just ignore that the NYSE exists). So it’s unfortunate that this allegation clouds the proceedings.

Goodness me, I hope what ails DWAC stock is fake news. But it just goes to show you that in some cases with SPACs, even when you’re winning, you’re losing.

On the date of publication, Josh Enomoto 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.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


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