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Why Shares of Digital World Acquisition Are Falling Today

The Motley Fool
The Motley Fool
 2022-01-24

What happened

Shares of the special purpose acquisition company (SPAC) Digital World Acquisition (NASDAQ: DWAC) were down more than 15% at 11:40 a.m. EST today for no obvious reason other than a general decline in the broader market, which is having a tough day today.

So what

Digital World Acquisition announced late last year that it intends to merge with and take public Trump Media & Technology Group, which is the parent company of Truth Social, a yet-to-launch social media company backed by former President Donald Trump.

https://img.particlenews.com/image.php?url=1umwx4_0duEv4BS00

Image source: Getty Images.

Truth Social says on its website that it encourages "an open, free, and honest global conversation without discriminating against political ideology." Once it launches, it is expected to pick up a big following among Trump voters, who believe that traditional social networks are not allowing them to speak freely.

Given the following on social media that Trump managed to build, the platform could certainly have a huge audience. Following the announcement of the merger, Digital World Acquisition shot up to more than $94 per share, likely making it one of the best-performing SPACs of all time. It currently trades around $62.

Now what

Investors are viewing a platform like Truth as a big disruptor to big tech. Trump Media will potentially roll out other media platforms as well.

But I think it's a bit early right now. The platform has not even launched yet and the Securities and Exchange Commission is investigating Digital World Acquisition for how it communicated with Trump Media prior to going public. With so much uncertainty, I would advise caution on the stock right now.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

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