Digital World Acquisition (NASDAQ:DWAC) is showing some unexpected signs of life today, up about 15% in morning trading. But I’m not expecting DWAC stock to be a long-term winner – or even to be a winner at all.
DWAC is the special purpose acquisition company (SPAC) that’s lined up to merge with Trump Media & Technology Group, the company headed by former President Donald Trump in his bid to return to social media. Trump media is trying to get the Truth Social platform off the ground – but it’s not going well.
Truth Social has been plagued by a slow, stumbling rollout. After launching on President’s Day, would-be users had been stuck on a waiting list while app workers try to get the platform up to par. Former U.S. Rep. Deven Nunes, who resigned from Congress to run the platform, had promised the Truth Social would be “fully operational” by the end of March, but the deadline passed.
The company recently moved to the top of the App Store downloads list, which seems to have been boosted by a move to Rumble’s cloud services finally allowing them to work through that waitlist.
Not even Trump is using the platform. He’s sent out one message (called a Truth), and has promised to be more active starting this week. But it hasn’t happened yet.
And it’s reasonable to question if it ever will. The whole reason why Truth Social exists is to offer a new platform after Trump was booted from Twitter (NYSE:TWTR) and other social media platforms after the Jan. 6 insurrection at the Capitol. But now that Elon Musk is buying Twitter and taking it private, there’s plenty of speculation that Trump will be reinstated on that platform.
For the record, Trump says he has no plans to go back to Twitter. But again, it’s reasonable to believe the former president will find his Twitter feed irresistible if he’s handed the keys once again.
I think it’s more likely that U.S. regulators will never allow the SPAC deal to finalize in the first place. Or, DWAC will decide that Truth Social’s messy rollout is a symptom of a bigger problem and find a way out of the deal altogether.
Kerrisdale Capital, which is short DWAC stock, last week released a report raising all sorts of doubts about the deal. “DWAC’s stock has much further to fall given the demonstrably misleading statements in DWAC’s registration statement, the status of TMTG’s operations at the time the merger agreement was executed, the cast of characters seeking to consummate that merger and those individuals’ flagrant disregard for SEC rules and regulations,” Kerrisdale said.
Even with today’s gains, DWAC stock is down 34% over the last month. I wouldn’t take a chance on DWAC stock here. There are better options.
On the date of publication, Patrick Sanders 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.
