What happened
After posting explosive gains yesterday, shares of Digital World Acquisition (DWAC +0.00%) and Phunware (PHUN +0.56%) are giving up ground in Wednesday's trading. The two Trump-affiliated stocks have frequently been trading in tandem lately and had slipped roughly 6% and 9.2%, respectively, as of 2 p.m. ET today.
With excitement building around Trump Media & Technology Group's upcoming Truth Social media platform and a recent rally held by the former president potentially pointing to another presidential campaign in 2024, Digital World Acquisition and Phunware surged on Tuesday. There doesn't appear to be any company-specific news behind the pullback for either stock today, so it's likely that the sell-off stems from investors taking profits after bullish momentum.
Image source: Getty Images.
So what
Digital World Acquisition is a special purpose acquisition company (SPAC) that's on track to take Trump Media & Technology Group public through a merger, and Phunware is being eyed by investors as a potential software service provider for Truth Social or another White House bid.
Anticipation for potential bullish catalysts tied to Truth Social's expected launch on Feb. 21 and Trump's recent rally in Arizona helped power big gains for both stocks on Tuesday, but it's not surprising to see their share prices fall today in the absence of fresh positive news to push either company's valuation higher.
Now what
Even with today's pullback, Digital World Acquisition and Phunware are both up significantly in 2022.
PHUN data by YCharts.
Of the two, Trump is more closely tied to Digital World Acquisition, with the SPAC set to begin operating and trading under the Trump Media & Technology Group banner following the completion of their merger. Phunware helped build the Trump campaign's mobile app in 2020 and provided additional data analytics and social media services. But it's still not clear whether the company is involved with Truth Social or a potential presidential campaign for 2024.
Digital World Acquisition and Phunware now have market capitalizations of roughly $3 billion and $282 million, respectively. While there are potential catalysts on the horizon that could help trigger explosive gains for both stocks, investors should approach each company with the understanding that there's not much visibility into the underlying businesses at present.
That sets up a high-risk, high-reward dynamic, and there's a good chance that Digital World Acquisition and Phunware will continue to see volatile trading in the near term.
