Digital World Acquisition (NASDAQ:DWAC) stock jumped 25% early on Oct. 13 after Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) added the Truth Social software to its Play store.
DWAC is trying to complete a merger with Trump Media & Technology Group (TMTG), which owns Truth Social, the social network backed by former President Donald Trump. The next attempt to get shareholder approval for the deal will occur on Nov. 3.
Shares were trading at over $19 early on Oct. 13, bringing the market capitalization to $800 million.
The Truth About DWAC Stock
Digital World is a special purpose acquisition company (SPAC) formed specifically to buy the social network. Hedge funds that had committed $1 billion to the venture as a public investment in private equity (PIPE) have been renegotiating terms with CEO Patrick Orlando.
The decision by Google to make the software available on Android phones followed an agreement by Truth Social to enforce moderation policies on the site. The listing improves the social network’s business prospects, which could help Orlando complete his negotiations.
PIPE investors withdrew $138 million of their promised investment late last month. Orlando then put $2.8 million from his Arc Global Investments II back into the company and was able to push back the deadline for completing the merger to December.
In addition to needing shareholder approval, the deal also faces a criminal probe over ties between the SPAC and its target. There are concerns the two companies were negotiating their merger as early as May 2021 but omitted this from filings to regulators. The fear is that the company’s actions may have violated the law.
DWAC has traded as high as $97 per share, and as low as $17, as the legal and financial drama has played out. Truth Social launched in February and now has an estimated 2 million active users. Twitter (NASDAQ:TWTR), with which the company competes, has an estimated 329 million active users.
What Happens Next?
The Google decision is good news and could increase Truth Social’s active user count. But the company still has hurdles to clear before completing the merger. Then, it must justify its market cap through revenue and earnings.
If the merger is not completed, DWAC would refund cash to investors at $10 per share.
On the date of publication, Dana Blankenhorn held no positions in any companies mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
