Buying Digital World Acquisition Is About Your Beliefs, Not About Fundamentals

  • DWAC stock continues to dazzle investors and casual observers alike.
  • Though the Trump SPAC is appealing, fundamental factors are working against it.
  • Ultimately, the DWAC decision depends on your personal motivations for ownership.
Truth Social app logo seen on the smartphone and blurred TMTG logo on the laptop.

Source: mundissima / Shutterstock

Although avoiding controversy seems to be the natural directive in this sensitive period in society, those who know how to harness the ghoulishness of political and ideological rhetoric can potentially spark a profitable venture. Just look at Digital World Acquisition Corp (NASDAQ:DWAC). While special purpose acquisition companies have garnered an arguably well-deserved poor reputation, DWAC stock remains a contender.

To be fair, volatility appears to have finally caught up with Digital World shares. At time of writing, DWAC stock is down 11% so far this year, a sharp contrast to what it was just days ago. Yet the enormity of support for the so-called Donald Trump SPAC — which will take Trump Media & Technology Group (TMTG) public via a reverse merger — has been in some ways unprecedented.

Understandably, supporters of DWAC stock are worried. But to bring in some context, this isn’t the first time shares went wild. In a roughly one-month stretch between late October and late November of last year, DWAC hemorrhaged 48% before gradually shooting back higher. Therefore, it’s not entirely inconceivable that the Trump SPAC could make an encore bullish performance.

But whether you want to expose yourself to the shell company may largely depend on your motivations.

DWAC Digital World Acquisition Company $45.79

How Long Should You Hold DWAC Stock?

Given that SPACs in general have a sordid reputation, it would appear that the Trump-branded shell company is a grenade with the safety pin off. If that’s the case, how long should you hold DWAC stock?

Obviously, this question will depend on your risk-reward profile. In the immediate sense, I think the power of the former president’s brand should be enough to generate intense interest. As a Bloomberg report pointed out, many Trump supporters view ownership of DWAC stock as a “badge of honor.”

Let’s explore this idea for a moment. Imagine you are a Trump supporter. You’re constantly receiving information from both the Trump team and the Republican party (and perhaps other conservative organizations) to donate to the cause. Usually, parting with your hard-earned cash is where you separate the wheat from the chaff.

But DWAC stock? That’s something that not only benefits Trump and conservative values — through the underlying Truth Social platform — but it also might profit you personally. Of course, there’s no guarantee of anything in the capital market but here’s the thing. If DWAC rises, you win. If DWAC tumbles, your values might take some of the sting away.

Put another way, if you simply donated to a political organization, your money is guaranteed to be gone (outside of tax-deduction considerations I won’t get into). But if you buy DWAC stock in lieu of a political donation? Shares could rise — you never know.

What if You Don’t Support Trump?

Ah, here’s the issue that DWAC stock eventually might face. Trump will not be around forever. I don’t mean that in a macabre sense. Rather, I mean that eventually, whether he wins a second term or not, he is not entitled to a third term. Necessarily, someone else will have to become the face of conservative values.

In that sense, DWAC stock might have an expiration date, because the Trump brand is arguably unique. Either it’s going to be November 2024 at the earliest or four years later at the latest. Would DWAC be relevant beyond 2028? It’s difficult to say because of political and demographic realities pushing average American values to the left.

Frankly, those political and demographic trajectories are likely to continue driving in that direction. Therefore, unless you have a politically motivated reason to buy DWAC stock, it’s difficult to justify buying shares if you are ideologically agnostic. Long-term demographic trends are just not supportive of a decidedly conservative social media platform.

It’s Up to Your Belief System

While 99% of investment theses involve either fundamental or technical factors, with DWAC stock, the narrative really might come down to whom you vote for. Without any judgment, if you’re a hardcore Trump supporter, DWAC appears a no-brainer.

But if you’re not a Trump supporter or are simply politically agnostic, you might want to consider that the political shifts in American society do not favor DWAC stock over the long term. With the total addressable market for strongly conservative views likely to decline over the many years ahead, an investment in Digital World may not be appropriate for your portfolio.

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 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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