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Why Digital World Acquisition Stock Is Climbing Again Today

The Motley Fool
The Motley Fool
 2022-01-20

What happened

Digital World Acquisition (NASDAQ: DWAC) stock has seen some volatile swings in this week's trading, but it's back to posting big gains today. The Trump-affiliated special purpose acquisition company's (SPAC) share price was up roughly 5.2% as of 2:30 p.m. ET Thursday.

Growth-dependent, and otherwise speculative, stocks got hit particularly hard in Tuesday and Wednesday's sessions, but they're now enjoying some rebound momentum. While there isn't any fresh news pertaining to Digital World Acquisition, the stock is getting a boost from today's market rally.

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Image source: Getty Images.

So what

Digital World Acquisition is set to take Trump Media & Technology Group (TMTG) public through a SPAC merger, which will then see the combined company operating and trading under the TMTG name. For now, it looks like the company's core business will revolve around Truth Social -- a social media platform that primarily seems to be positioned as an alternative to Twitter .

The SPAC stock got an explosive start to the week, with excitement for Truth Social and a recent rally held by Trump in Arizona helping to push the stock up roughly 19.3% in Tuesday's trading. Shares pulled back on Wednesday, but they're now up roughly 15% in the week so far. Meanwhile, the Nasdaq Composite index is down roughly 2.9% across the stretch.

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^IXIC data by YCharts

Today's rebound for growth-dependent and speculative stocks seems to largely be a response to recent sell-offs, but worse-than-anticipated unemployment numbers could also be aiding the rally. The Labor Department published an update Thursday showing 285,000 jobless claims for the week ending Jan. 15, which was significantly higher than the 225,000 claims forecast by economists. The market may be interpreting the unemployment numbers as a sign that the Fed will take a more cautious approach to raising interest rates and curbing other economic stimulus measures.

Now what

TMTG's Truth Social app is expected to launch Feb. 21, and it's likely that Digital World Acquisition stock will continue to see some big swings in the lead-up to its debut. The soon-to-be-completed merger between the companies could also spur significant pricing action, as SPAC stocks have been prone to volatile moves after completed combinations.

Digital World Acquisition now has a market capitalization of roughly $3.1 billion despite not much being known about Truth Social or its business outlook. If the platform manages to attract a sizable, engaged user base, the stock's price could surge above current levels, but a tolerance for volatility and risk should probably be a prerequisite for investors looking to bet big on this one.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns and recommends Twitter. The Motley Fool has a disclosure policy .

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