DWAC Stock Falls 10% on New Truth Social SPAC Subpoenas

  • Digital World Acquisition Corp (DWAC) is facing new legal trouble.
  • The company’s board members have received new subpoenas from federal prosecutors.
  • DWAC stock has been falling all morning as the company braces for more turbulence.
"DWAC stock" - DWAC Stock Falls 10% on New Truth Social SPAC Subpoenas

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Digital World Acquisition Corp (NASDAQ:DWAC) is falling again this morning. The blank-check partner of the Trump Media & Technology Group (TMTG) has reported new legal troubles. According to the company, its entire board of directors has received subpoenas from federal prosecutors. With the merger between the two companies being further called into question, DWAC stock is off to a bad start this week.

Since news of the subpoenas broke this morning, DWAC has been falling. It dipped 6% in premarket trading and has fallen nearly 10% since markets opened, displaying significant volatility. None of this is new for the stock. Shares have been highly turbulent over the past week. However, there have been no steep declines until this morning. Much of this volatility is due to the company’s ongoing legal struggles. While this news is hardly the first negative catalyst, it raises the question of how many similar stories investors will be willing to put up with.

Like DWAC Stock, the Merger Is in Question

DWAC stock has displayed enough turbulence to make even the most bullish investors nervous. Despite rising steadily in early 2022, it has shed more than 51% of its value over the past six months. This type of volatility is troubling on its own. When investors factor in the recent probes from the U.S. Securities and Exchange Commission (SEC), it is hard to be optimistic.

Now the company is facing the last thing it needed: federal subpoenas of its entire board. The board of directors has seven members, including CEO Patrick Orlando and CFO Luis Orleans-Braganza. But it doesn’t stop there. On June 24, the company received a grand jury subpoena. Reuters reports that “the latest subpoenas to Digital World sought the same documents as the SEC probe as well as requests relating to the company’s S-1 filings.”

It’s clear that the federal government is only just starting its in-depth investigation of the highly anticipated merger. And for as long as it continues, the fate of DWAC stock is questionable at best. When short seller Kerrisdale Capital published a short report against DWAC, it emphasized that it didn’t expect the merger to successfully close. Since its publication, the second SEC probe and the new subpoenas have cast further doubt over the merger’s future. While the company has promised that it remains committed to merging with TMTG, that doesn’t mean it will happen. Commitment to a deal doesn’t mean much when ongoing legal troubles continuously threaten to derail it.

While TMTG has stated it will cooperate with the SEC’s investigation, no other statements have been offered on the latest subpoenas. While investors wait for more news, DWAC stock is likely to continue falling as uncertainty pushes it down. Investors still have no reason to be optimistic and plenty of cause to be cautious.

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/2022/06/dwac-stock-falls-10-on-new-truth-social-spac-subpoenas/.

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