Those who have been following the world of special purpose acquisition companies (SPACs) know how volatile this space can be. This year, a great example of this volatility has been Digital World Acquisition (NASDAQ:DWAC). The SPAC looking to bring former President Donald Trump’s Truth Social public has seen extreme volatility (mostly to the downside) this year. That said, today’s 5% rise in DWAC stock has piqued the interest of many investors.
Today’s surge appears to be tied to rumors around what could be announced by Trump tomorrow, Dec. 15. The former president said in a Truth Social post earlier today that he will make a “major announcement” on Thursday.
Of course, such a vague post is likely to spark imaginations. Let’s dive into what investors are talking about when it comes to this major announcement.
Is DWAC Stock a Buy Ahead of Tomorrow’s Announcement?
There are plenty of scenarios investors appear to be running with respect to this statement. The former president could talk about his intention to run for another term. He could also be headed back to rival social media platform Twitter to post his thoughts to a larger audience. Or, there could be something brewing with this ongoing SPAC merger.
The latter scenario appears to be what DWAC stock investors seem to care about. Shareholders recently voted to extend the closing period by another 12 months, after a vote on the proposed merger had been adjourned multiple times. Most SPACs have a specified amount of time to close a deal. If a deal is not closed within a given window, the money investors put up gets returned.
Now, this extension does benefit investors, considering the fact that the SPAC — with a fair value of $10 per share — trades above $21 at the time of writing. Investors who received their $10 back after investing at these levels would post a big loss. Indeed, the fact that shares of DWAC traded above $100 at one point this year is an indication of just how incredible the mania has been around this stock.
Perhaps something positive will be announced tomorrow. However, as with other SPAC mergers, investors ought to take caution when considering investing in such companies. What goes up can easily come down just as quickly. We’ve seen as much play out this year.
On the date of publication, Chris MacDonald 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.
