What happened
After posting big sell-offs in November, Digital World Acquisition Company (DWAC) has been regaining ground early in December's trading. The Trump-backed special purpose acquisition company (SPAC) closed out the last week of trading up roughly 24.5%, according to data from S&P Global Market Intelligence.
Digital World Acquisition Company (DWAC) actually started the week on a worrisome note, announcing that it was being investigated by the SEC and FINRA for matters related to trading of its stock prior to publicizing its plans to merge with Trump Media & Technology Group (TMTG). However, there has yet to be any finding of wrongdoing by the company, and the SPAC stock regained ground amid signs of mounting institutional backing.
Image source: Getty Images.
So what
Saba Capital Management announced on Dec. 9 that it had purchased a stake in DWAC. The hedge fund was an early investor in DWAC but sold its position when shares skyrocketed following the unveiling of the plan to take Trump Media & Technology Group public through a merger. News of Saba Capital buying back into the stock followed an announcement last week that DWAC had received a $1 billion investment from a group of institutional investors.
Now what
Digital World Acquisition Company falls into the meme-stock category, and it's sometimes prone to posting big pricing swings on relatively little news. The SPAC's combination with Trump Media & Technology Group will likely be completed in the near future, but there's not much visibility into what the combined company and its business model will look like.
TMTG's TRUTH Social is currently in beta release, and the social-media platform is expected to see its debut in the first quarter of next year. While detailed financials for TMTG have not been released, it's likely that TRUTH Social has not yet generated any significant revenue, so valuing the combined company involves a lot of guesswork at this point.
If TMTG manages to attract a sizable, engaged user base, it may be able to build significant revenue streams through digital advertising, in-app purchases, or subscription fees. However, investors should proceed with the understanding that DWAC stock looks very risky at present.
