The second go-around with the Securities and Exchange Commission (SEC) continues for Digital World Acquisition Corp. (NASDAQ:DWAC). Yesterday, shares plunged for the merger partner of Trump Media and Technology Group (TMTG) after the SEC subpoenaed the company for more information on the deal. DWAC stock has plunged even further today as the grim news continues to spur both bearish energy and troubling questions.
DWAC stock began declining yesterday and it hasn’t stopped since. Today, it fell 29% and shows no signs of slowing down later this week. After remaining mostly stagnant for the past month, DWAC stock has plunged into the red by nearly 40% in less than two market days. Unless something dramatic happens, it will likely fall even further before investors see marginal gains — if they ever do.
What’s Happening With DWAC Stock
Investors remember when the SEC launched its first probe into DWAC and TMTG. Late in 2021, it began requesting information on the two companies, sending DWAC stock down. Now, the agency is redoubling its efforts and things look worse for both parties. Not only do regulatory investigations tend to push stocks down, but in this case, it could delay the merger.
When famed short-seller Kerrisdale Capital published a highly bearish report on DWAC, it speculated the two companies were unlikely to successfully combine. While it finally submitted its S-4 form, plenty of unanswered questions remain about DWAC. The most pressing of which is, what will the SEC find? And before it concludes the investigation, how long will shares continue to fall?
While there are no clear answers at present, it is clear DWAC stock is in for more turbulence. TMTG’s social media platform, Truth Social, already had plenty of strikes against it, from its rocky launch to several of its top executives leaving. While Donald Trump’s presence on the app has boosted traction recently, it hasn’t been enough to help DWAC achieve sustainable growth.
Now, investors must wait for the SEC to conclude its investigation and face the possibility its findings will stand in the way of the merger. This is a grim prospect, and some investors won’t wait to see how the probe effects their holdings.
What It Means for DWAC
It’s true DWAC stock stayed afloat following news of the first SEC probe. But this time is different. In late 2021, anticipation was high as investors waited for the launch of Truth Social’s app. But since the platform’s turbulent debut led investors to question the company’s stability, little has happened to inspire confidence in DWAC stock or the merger. Bearish energy has gradually crept in and will only increase as the SEC digs further into the pending deal.
The future is uncertain for DWAC stock, but Wall Street hates uncertainty. Investors had little reason to stick around before the recent subpoena. Now, they have even more cause to be concerned about a seemingly unstable company.
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.
