Digital World Acquisition (NASDAQ:DWAC) is back in the green today after months of struggling to gain momentum. Recently, Elon Musk’s acquisition of Twitter (NYSE:TWTR) sparked discussion about Truth Social’s days being numbered. Now, though — as Musk’s deal hangs in the balance — the platform is finally seeing a bump in popularity, helping DWAC stock rise. But Truth Social’s new first-in-downloads status for the free app category doesn’t mean its problems are solved.
Right now, DWAC stock is continuing its winning streak for the second consecutive day. As of this writing, shares are up 18% for the day, although they recently dipped. Today’s early surge puts it up for the week so far. However, shares remain in the red for the past one month by more than 30%.
What’s driving shares up today? Well, the company just received some help from Elon Musk. Before markets opened this morning, the Tesla (NASDAQ:TSLA) CEO tweeted a screenshot of app store rankings, showing that Truth Social was currently placed higher than Twitter.
Truth Social is currently beating Twitter & TikTok on the Apple Store pic.twitter.com/RxawVUAYKH
— Elon Musk (@elonmusk) April 27, 2022
We all know a tweet from Elon Musk can elevate any stock. But let’s unpack his reasons for highlighting one of his soon-to-be competitors.
What’s Happening with DWAC Stock?
Some DWAC stock investors are celebrating this morning, seeing Musk’s tweet as an endorsement for Truth Social. However, a closer look reveals that Musk was likely trying to imply something negative about Twitter more than anything. Specifically, Musk seems to have been saying Twitter is so poorly run that more users are downloading Truth, a platform that many have dismissed as a joke.
Of course, the news hasn’t been all bad for DWAC this week. For example, Trump Media & Technology Group (TMTG) — Digital World’s partner — recently registered as a business in the state of Florida. Truth Social also migrated to Rumble’s cloud infrastructure. Fast Company reports that these changes may be spurring the platform’s new popularity. However, it’s more likely that users are coming to the platform after former president Donald Trump said he would not return to Twitter even if his ban is reversed. Members of Trump’s inner circle have expressed doubts about the claim.
That said, Wall Street is still bearish on DWAC stock, even with the recent surge. As Insider reports, analyst Enrique Abeyta of Empire Financial Research has written it off. Abeyta states, “Musk’s acquisition of Twitter is a mild negative, but there were so many negatives already that you can’t really even describe it as a game-changer.”
Hedge fund Kerrisdale Capital also recently released a damming short report on the stock, speculating that TMTG is unlikely to even close its merger. The report highlights a lack of filed forms and the little-to-no information provided by the company.
What It Means
Looking forward, investors should be careful not to mistake today’s DWAC stock bump for more than what it is. The company has captured some superficial momentum, but current catalysts don’t address Truth Social’s actual problems.
Elon Musk’s plans to alter Twitter’s free speech policies still stand to usher in the end for Truth Social. What’s more, although Trump claims he won’t return to Twitter, he still hasn’t posted anything new on Truth. That’s the one thing he could do to actually help the platform.
All told, a Twitter takeover is coming — and when it does, Truth Social’s downloads will plunge once more. DWAC stock should be quick to follow.
On the date of publication, Samuel O’Brient did not hold (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.