Digital World (DWAC) Stock Falls as Merger Vote Drags On

  • Digital World Acquisition (DWAC) was set to vote on delaying its merger today, but the meeting was promptly adjourned.
  • DWAC stock has been steadily falling since last week and is currently down 5%.
  • Performance indicates that markets have long since lost confidence in the stock.
A hand hovers over a phone screen with the Truth Social social media logo
Source: rafapress / Shutterstock

Today marked the next step in Digital World Acquisition’s (NASDAQ:DWAC) complicated journey. The special purpose acquisition company (SPAC) asked investors once again to vote to delay the merger with Trump Media & Technology Group (TMTG). Digital World has made multiple attempts to secure a shareholder vote to extend the merger process this year.

Digital World CEO Patrick Orlando has asked former President Donald Trump and TMTG CEO Devin Nunes to pressure shareholders to vote, but even that hasn’t yielded great results. Most recently, today’s meeting quickly adjourned because DWAC could not get the necessary amount of shareholders for the vote. As of this writing, DWAC stock is down more than 5% for the day.

DWAC needs 65% of shareholders in order to enact a merger delay. The date for the merger is currently Dec. 8, 2022, but Digital World’s leaders want to push it back further. It’s not hard to see why; Truth Social has been plagued by difficulties, including falling downloads and regulatory probes. Last week, the company also received its worst news yet; Elon Musk is renewing plans to acquire Twitter (NYSE:TWTR).

Things looked bleak heading into today’s meeting, but the quick adjournment suggests DWAC stock may in fact be doomed.

Everything Is on the Line for DWAC Stock

One of the primary forces pushing DWAC stock down lately has been recent regulatory problems. Back in August, TMTG Senior Vice President William Wilkerson filed a complaint with the U.S. Securities and Exchange Commission (SEC). The whistleblower recently spoke to the Miami Herald about the future of the company:

“One way or another, this company is going to go bankrupt […] I don’t think the company is going to be approved by the SEC.”

That foreboding  message gives investors plenty of cause for alarm, but it doesn’t stop there. Wilkerson also said that if the merger extension is not approved today, the combination may not happen at all. With the deal called off, investors would see their funds liquidated and returned to them. Now, that may be exactly what happens if another vote does not take place before Dec. 8.

TMTG would likely have no luck finding another SPAC to take it public after this kind of failure. But even if DWAC receives the shareholder votes it needs to delay the merger even further, there’s still the question of SEC approval. The agency has investigated both companies since DWAC stock shot to market prominence last year. It could easily issue more regulatory roadblocks for the pending merger.

The Bottom Line

That all said, the deal falling apart could actually be a best case scenario for DWAC stock. Digital World’s quest to delay the merger has been primarily driven by a lack of confidence in TMTG and Truth Social.

DWAC stock has plunged more than 65% year-to-date (YTD), so that lack of confidence is not hard to understand. What’s more, Donald Trump’s continued legal battles make it hard to trust that TMTG — a company bearing his name — is a stable investment or partner.

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 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.

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