- Digital World Acquisition stock has made mincemeat out of the short sellers.
- Not everyone will like the company, however, and it’s been suggested that hardly anyone is actually using the Truth Social platform.
- Still, investors shouldn’t short-sell the stock even if they’re skeptical.
Digital World Acquisition (NASDAQ:DWAC) may be “just” a shell company, but it’s definitely an interesting one. Currently in progress is the special purpose acquisition company (SPAC) merger of Digital World Acquisition and Trump Media & Technology Group (TMTG). So, an investment in DWAC stock is really a stake in TMTG.
TMTG is led, of course, by former President Donald Trump. Its associated social media platform is Truth Social. Trump’s vision for this venture has been politically conservative and focused on free speech.
Some investors might choose to express their political positions by betting against DWAC stock. Alternatively, they might feel the stock has gone too high and should be re-rated much lower.
However, it’s generally not advisable to let politics cloud our investment strategies. Besides, a stock can continue on its upward trajectory even after a strong rally — as long as the public is willing to pay more for it.
|DWAC||Digital World Acquisition||$68.68|
What’s Happening with DWAC Stock?
Prior to the TMTG merger announcement last October, DWAC stock traded near $10. Soon after that, the share price reportedly surged 350% in a single day. We can’t just attribute this to Reddit meme-stock traders. There’s also the Trump factor, as he has a large number of supporters.
InvestorPlace contributor Chris Tyler summed up the former president’s populist appeal, observing, “At the Conservative Political Action Conference (CPAC) … Trump indicated a possible third run for president in 2024. Moreover 59% of CPAC attendees polled said they want Trump to be the Republican nominee.”
Trump’s supporters and some free-speech advocates will, in all likelihood, continue to keep DWAC stock afloat for a while. You don’t have to agree with their political beliefs, but as a cautious investor, one should be aware of their influence.
As of mid-March 2022, the share price was still above $65 and the short-sellers were still underwater. Ultimately, it’s best to leave our politics at the door and just focus on the established facts.
DWAC Is Hard to Measure
If you bet against DWAC stock, you’ll be wagering against a pick that’s difficult to measure in terms of its intrinsic value. You won’t find a price-to-earnings ratio for Truth Social, or any 10-Q or 10-K financial forms. You might find some data on Digital World Acquisition, but that’s only the shell company.
It’s generally not a great idea to short-sell a stock if you only have incomplete financial data on a company. Shorting is already a risky strategy, so why compound the risk with limited information?
One high-profile article on Slate claims pretty much no one is using Truth Social. On the other hand, an article from TheStreet points out the downloads for the free Truth Social app exceeded 170,000 in just two days.
Furthermore, Digital World Acquisition stated Truth Social is anticipated to have 81 million registered users by 2026. These varying viewpoints, once again, make it difficult to measure DWAC stock’s true value.
What You Can Do Now With DWAC Stock
Political views have their place and purpose. However, they shouldn’t cloud our thinking as investors. Placing a bet against DWAC stock would be extremely risky, even after the stock’s huge post-merger rally. So, I would classify this stock as “long-only,” meaning no short-selling.
This doesn’t mean everyone will feel comfortable investing in Digital World Acquisition and Truth Social. If you believe the platform will gain momentum based on Trump’s popularity, however, then it’s not unreasonable to take a small position in the shares.
On the date of publication, David Moadel 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.