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Trump’s Truth Social Is Still an Interesting Ground-Floor Opportunity

Fans of former President Donald Trump’s political theory look to have a great opportunity to capitalize on Digital World Acquisition (NASDAQ:DWAC) and DWAC stock at present. The special purpose acquisition company (SPAC) bringing Trump’s Truth Social platform public recently dipped below the $40 threshold. That’s the lowest it has been since the merger was announced on Oct. 20. 

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Source: Shutterstock

When the merger news first dropped, DWAC stock immediately skyrocketed from under $10, passing $90 two days later. The SPAC shares have gradually declined since then, but they still trade well above that initial $10 price. 

Here’s what you should know about DWAC stock and Truth Social moving forward.

DWAC Stock: A Crystal-Clear Allure

For starters, it may be best to take a peek at Truth Social’s website. The site labels itself as a “‘Big Tent’ social media platform that encourages an open, free, and honest global conversation without discriminating against political ideology.” That description is a clear shot at Meta Platforms (NASDAQ:FB) and Twitter (NYSE:TWTR), both of which banned Trump earlier this year.

For those who believe that both Meta and Twitter are discriminating on the basis of political ideology, DWAC stock clearly holds some allure. But there are also those who believe that’s true — myself included — yet who also dislike Trump’s brand of politics. 

Wherever you fall on that spectrum, there’s no doubt that Trump has a massive fan base. When Twitter permanently banned the former President in January, his handle had just short of 89 million followers. 

Those followers will likely be joining Truth Social in droves. The platform should soon undergo its beta launch, although the launch was already scheduled for (and missed in) November per the merger announcement.

Still, those hoping to take part in the beta can go to the site, which is solicitating for early users and adding them to a wait list of invitees. Following that beta launch, an initial rollout of the website is expected in early 2022. 

Investors have every reason to believe this launch will be a success. Why? Because Trump already has a built-in user base that continues to demand his posts. The void left by his ban from both Twitter and Facebook is still strong. 

So, users will probably flock once the public rollout occurs. That’s great for determining the demand for DWAC stock and Truth Social. However, investors still need to know what the valuation of DWAC looks like. 

The Valuation and Potential Roadblocks

When it comes to the valuation of DWAC stock, the merger announcement noted the following:

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.”

DWAC currently holds a valuation of approximately $1.6 billion as measured by market capitalization. That market cap is based on a price in the $40 range. So, the $100 million difference between $1.6 billion and $1.7 billion suggests room for growth. 

Still, there are no concrete methods by which to price stocks. Analysts can be inaccurate with even the steadiest, most established names. So, DWAC stock is even more difficult to put a price on.

Valuation aside, though, Senator Elizabeth Warren is also pushing for the U.S. Securities and Exchange Commission (SEC) to open an investigation into the SPAC deal itself. The allegations are that the two sides held private merger discussions that “may have committed securities violations […] as early as May.”

Those allegations were leveled back in mid-November. DWAC stock has steadily declined since then. However, the allegations will be very difficult to prove.

What to Do with DWAC Stock

When it comes down to it, whether or not to invest in DWAC stock is not just a fundamental financial judgment. It’s also an inherently political and social statement.

Some will buy into this stock based on their affiliation with the Trump brand alone. But others who don’t like Trump may still buy in, too. I can see strong arguments for both sides. And if Trump has shown us anything, it’s that he should never be completely counted out.

On the date of publication, Alex Sirois 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.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.


Article printed from InvestorPlace Media, https://investorplace.com/2021/12/trumps-truth-social-is-still-an-interesting-ground-floor-opportunity/.

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