Digital World Acquisition Corp (NASDAQ:DWAC) is poised to end the summer on a low note. DWAC stock has lost 70% of its value over the past six months. It’s not hard to see why. DWAC hadn’t finished dealing with regulatory probes into its board of directors when the FBI raided Donald Trump’s Mar-a-Lago estate. The investigation into the former president isn’t likely to conclude anytime soon but its company’s special-purpose acquisition company (SPAC) partner isn’t taking any chances. The blank-check company wants to delay its merger with the Trump Media & Technology Group (TMTG) and is asking investors to vote on it. Sept. 6 marks the shareholder meeting.
More specifically, the company wants to push the merger deadline back to Sept. 8, 2023. Since it filed for this motion, DWAC stock has been trending downward. It fell more than 14% last week and this one isn’t off to a better start this week. Shares are down 6% for the day and there’s nothing to suggest that DWAC will rebound anytime soon. Usually, investors are told to mark their calendars for a deadline that promises to boost stocks. But in this case, Sept. 6 represents the last day to sell before it falls even more.
Let’s take a closer look at what investors can expect.
What’s Happening With DWAC Stock
It makes complete sense that DWAC would be nervous about the merger. The SPAC knows that it hitched its wagon to an unreliable horse. When news broke in 2021 that Trump would be launching a social media company, DWAC stock became an overnight sensation. In the months that followed, the powerful anticipation kept shares rising as the world waited for the debut of Truth Social. But since it launched, the platform has failed to gain the type of traction that it needed to keep DWAC stock in the green. Even as app downloads rose followed the Mar-a-Lago raid, it did not push shares up.
In April 2022, a short report from Kerrisdale Capital made the strong case that DWAC wouldn’t be able to close the merger. The short seller saw this as a reason to bet against DWAC stock. Now the company doesn’t seem to want to close the merger because it doesn’t trust the stability of its partner. CNBC reports that the blank-check firm is considering liquidation if shareholders don’t vote in favor of extending the deadline. While this threat will likely ensure that investors support it, it doesn’t mean DWAC stock is destined for growth. Truth Social has proven that for all the hype that carried it into its launch, it has no ability to grow, scale or provide real value. Even the offer of exclusive content from Trump did not give the platform the boost it needed. And while Trump may officially declare his 2024 campaign soon, that prospect hasn’t generated any lasting momentum yet.
The Bottom Line
DWAC is banking on being able to push the deadline back far enough for a Trump-related catalyst to arise and push the stock up enough to jumpstart the company. But if that doesn’t happen, and there’s absolutely no guarantee or reason to think that it will, the extension will end up being irrelevant and DWAC stock will end up right back in the red.
Investors will be watching carefully for this date but if the company keeps floating liquidation as a possibility, fewer and fewer shareholders will stick around for the vote.
On the date of publication, Samuel O’Brient did not hold (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.