Former President Donald Trump hasn’t had much good news lately, with legal troubles resulting in him being booked at Georgia’s Fulton County Jail in August. Since then, things haven’t really improved on most fronts. However, this week did begin with a positive update for one of his companies. Specifically, shareholders have granted Digital World Acquisition (NASDAQ:DWAC) an extension for its merger with Truth Social parent Trump Media and Technology Group (TMTG).
DWAC stock is rising today on the news that, despite the many problems that Truth Social is facing, the merger deal isn’t quite dead in the water yet. Of course, this doesn’t mean that either company’s problems are over. But it does provide investors a moment to catch their breath.
What’s Happening With DWAC Stock?
TMTG’s special purpose acquisition company (SPAC) partner started the day with a pop, although it hasn’t sustained the momentum. As of this writing, DWAC stock is up about 3% for the day but hasn’t seen much growth over the last few hours. This suggests that, while this recent development has reassured some investors, it hasn’t been enough to generate much real growth for the troubled stock. Given the many obstacles facing Truth Social and TMTG, this isn’t surprising at all.
This also came dangerously close to being the end of the line for Digital World. If not enough shareholders voted in favor of extending the merger, the company would have had to “dissolve and return $300 million to shareholders, depriving Trump Media & Technology Group of funds from the deal.” That said, the extension doesn’t mean that the deal will now close with no further complications. Multiple factors could stand in the way. As Seeking Alpha reports:
“Trump SPAC DWAC is still not entirely out the woods. Under a reworked agreement last month, Trump Media still can walk away from the deal by Sept. 30 if [it] decides it’s not in the best interest of holders. The company can also abandon the deal by Oct. 13 if DWAC doesn’t filed an amended registration statement by Oct. 9. DWAC can also [decide] to end the deal.”
On top of that, being linked to Trump carries a significant amount of risk for any company right now. His legal troubles are still piling up. Indeed, if Trump goes to jail, it could pose severe consequences for DWAC stock. For instance, if the former president isn’t able to use Truth Social, traffic to the app will only fall further as more users flock back to X, the platform formerly known as Twitter.
Essentially, both Digital World and TMTG face an uphill battle, regardless of whether or not they can successfully merge.
Why It Matters
Investors know that Digital World has been plagued by many problems since it joined forces with TMTG. From regulatory probes to continuous failures to complete the merger, the SPAC has given investors plenty of reasons to dump shares and run the other way. Trump’s use of Truth Social has helped keep the platform somewhat in the spotlight, but he also recently began posting on X/Twitter again, where he has significantly more followers.
Even with the merger extension, investors should be careful not to flock back to DWAC stock. At their core, shares of Digital World remain highly unstable.
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.
