Even in the wake of Donald Trump’s Super Tuesday victory, Digital World Acquisition Corp (NASDAQ:DWAC) just can’t catch a break. The special purpose acquisition company (SPAC) is more closely linked to Trump than any other stock. The fact that the former president all but secured the GOP nomination last night. However, DWAC stock has still been falling all day.
This could be due to the fact that the company is inching closer to the shareholder vote that decides its merger with the Trump Media & Technology Group (TMTG), the parent of Truth Social. After months upon months of seeing the vote delayed, shareholders will finally meet on March 22. If the motion to merge the two companies does not pass, it will likely be the end of the line for DWAC stock.
Does this mean that investors should be worried as this important date approaches? It certainly hasn’t been easy for the companies to get to this point. As such, it’s hard to be optimistic about its prospects. But let’s take a closer look at what is at stake for DWAC and its shareholders.
What’s Happening With DWAC Stock
Until it merges with the TMTG, DWAC is still simply a blank check company. That means its only utility comes from the partner it is trying to merge with. And any company linked to Trump comes with a substantial amount of risk due to his uncertain future, specifically his 91 indictments. While DWAC stock has enjoyed a boost due to election momentum, last night marked the biggest event of the primary. And while Super Tuesday went well for Trump, it hasn’t helped DWAC, which is down 11% as of this writing.
What does this mean for the stock’s future? In short, the market is highly uncertain about DWAC’s longevity, even as Trump secures the GOP nomination.
Since the two companies first announced their plans to merge in October 2021, they have been plagued by regulatory probes. In August 2023, DWAC opted to delay the merger, likely due to Trump’s mounting legal problems. Last week, two TMTG shareholders filed a lawsuit against the company, alleging that Trump and other leads are engaged in a “last-minute stock grab” to dilute their stakes before the merger.
This serves to complicate the pending deal. While it’s hard to predict the lawsuit’s verdict, one thing is clear: Trump stands to benefit significantly from the merger. As CNBC reports, he holds a stake of roughly 90% that could be worth up to $3 billion if the two companies successfully merge. Given his legal debt that exceeds half a billion dollars, this windfall would be coming at an excellent time. And as the TMTG recently disclosed in an S-4 regulatory filing: “President Trump has significant influence over key decision making as a result of his control of a significant portion of TMTG’s voting stock.”
Will the Deal Close?
With that in mind, it’s likely that the merger will go through. DWAC’s shareholders know that in order for their holdings to be worth anything, the two companies must merge. This doesn’t mean that DWAC stock will be a profitable long-term investment. It likely won’t be. However, it does mean that the new stock will finally be formed. At least in the short term, merging will provide a temporary lifeline for investors.
On the date of publication, Samuel O’Brient did not have (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.
