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Why Shares of Digital World Acquisition and Phunware Crashed Today

By Joe Tenebruso – Oct 26, 2021 at 5:56PM

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These popular Trump-related stocks reversed course after their huge gains last week.

What happened 

Digital World Acquisition (DWAC 9.94%) and Phunware (PHUN 5.71%) both saw their stock prices rocket over 1,000% at one point last week, as investors' excitement for the special purpose acquisition company (SPAC) and advertising software provider that are linked to former President Donald Trump reached a fever pitch.

But investors' views toward the companies soured on Tuesday. By the close of trading, shares of Phunware and Digital World Acquisition were down 39% and 30%, respectively. 

So what 

The decline in Digital World Acquisition's stock price appears to have been sparked by comments made by Trump before the market opened. Last week, investors cheered when the SPAC announced its plan to merge with Trump Media & Technology Group. But when the former president shared more details of his plans to build a new social network that would try to rival Facebook and Twitter and a video-streaming service to challenge Netflix, that excitement seemed to wane.

In a statement, Trump acknowledged the difficulties of competing head-to-head with these tech titans: "Since it is both hard and expensive to build a new platform totally independent of Big Tech's infrastructure, it would have to be an extremely well-funded, multi-year undertaking. In addition, such a platform would need the ability to rapidly attract millions of users, welcoming not only Republicans to join, but Independents and Democrats as well."

Those comments likely threw cold water on investors' hopes for a rapid buildout of Trump's planned social media platform and the potential for quick profits.

A person is pointing to a stock chart that rises sharply and then falls.

Image source: Getty Images.

Meanwhile, Phunware, which saw its stock price soar last week apparently due to investors' hopes that it could serve as a key technology provider for Trump's social network or streaming service, also gave up much of its recent gains. Phunware helped to manage mobile applications related to Trump's reelection campaign, though there have been no reports that it's working with Digital World Acquisition. 

The nearly 40% fall in Phunware's share price came after the company said it would sell up to $49.5 million worth of its stock on the open market at currently available prices. 

Now what 

Former President Trump certainly doesn't lack ambition, but taking on companies like Facebook, Twitter, and Netflix all at the same time might be difficult even for him. Investors are beginning to rein in their near-term expectations, which could lead to further stock price declines for Digital World Acquisition and Phunware in the coming days.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook, Netflix, and Twitter. The Motley Fool has a disclosure policy.

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