Why Is Digital World (DWAC) Stock in the Spotlight on Tuesday?

While it’s not completely clear what’s moving Digital World Acquisition Corp. (NASDAQ:DWAC) stock today, a few recent events have caught investors’ attention. For one, reports of outages at Truth Social began to circulate yesterday morning. According to data from DownDetector, outage reports peaked yesterday at roughly 2:30 p.m. Eastern with 94 in total. DWAC stock was quick to fall yesterday, but a day later, an unexpected surge has left investors with questions.

Someone is viewing the Truth Social app in an app store. TMTG and DWAC stock.
Source: Ink Drop / Shutterstock

What’s Happening With DWAC Stock

DWAC stock fell yesterday amid the outage reports. Even after the platform resumed functionality, shares remained in the red. Today, they failed to gain momentum until about 2:00 p.m., when they unexpectedly surged almost 6%. While DWAC quickly fell back down, it is currently up 3.13% at the time of writing.

The reason behind this surge isn’t immediately clear. However, DWAC stock has seen considerable media traction this afternoon on a rumor that has certain investors excited.

Why It Matters

As DWAC stock has fallen recently, speculation has arisen about the competition it faces. If Elon Musk succeeds in his attempts to take over Twitter (NYSE:TWTR), Truth Social will have a rival that boasts a much larger user base. Yesterday, rumors were circulating that if he were blocked, Musk would launch his own social media platform. Today, a new rumor involving the Tesla (NASDAQ:TSLA) CEO is picking up steam on social media.

While DWAC stock was rising this afternoon, TWTR stock was falling. Many investors on Twitter noticed this and speculated that Musk had moved some of his Twitter holdings to make room for a stake in DWAC. Others flagged the fact that the former President Donald Trump’s Truth Social profile reached 1 million followers today. However, that isn’t likely to make much difference for DWAC. Trump has only posted on the platform once, on its launch day.

Today’s surge is more likely due to the Musk rumor. While it is complete hear say at this point and there is no actual evidence that it is true, a speculative rumor is sometimes all it takes to move a stock. However, when such a scenario plays out, shares are often just as quick to fall. Investors should be more focused on the problems displayed by yesterday’s outage, which further suggest that the platform is unstable and unreliable. The Daily Beast reports that Truth Social users were outraged by the outage. And at a time when downloads are steeply declining, the platform can’t afford to lose the people who post use it.

What’s Next for DWAC Stock

Today’s turbulence should remind investors of DWAC stock’s instability. It seems that each major news story about DWAC shakes investor confidence even more. “Musk takeover or not, Truth Social could continue to struggle building an audience,” states InvestorPlace contributor Thomas Niel. “With this, it will be hard for the stock to maintain its high implied valuation.”

Niel isn’t the only expert who sees DWAC stock as a play to avoid. As downloads have plunged, investors have been pulled toward other social media plays that don’t include the instability associated with Trump. DWAC saw brief gains today, but it will be just as quick to fall again, reminding investors why they were avoiding it in the first place.

On the date of publication, Samuel O’Brient 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.

Samuel O’Brient has been covering financial markets and analyzing economic policy for three-plus years. His areas of expertise involve electric vehicle (EV) stocks, green energy and NFTs. O’Brient loves helping everyone understand the complexities of economics. He is ranked in the top 15% of stock pickers on TipRanks.

Article printed from InvestorPlace Media, https://investorplace.com/2022/04/why-is-digital-world-dwac-stock-in-the-spotlight-on-tuesday/.

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