Shares of Digital World Acquisition Corp. (DWAC 0.08%), the special-purpose acquisition company (SPAC) planning to buy the parent company of the Donald Trump-backed social media platform Truth Social, traded roughly 6% higher as of 11:30 a.m. ET today. The stock had been up more than 12% when the market opened.
Shares spiked after former President Donald Trump posted on Truth Social. The platform has also seen an increase in downloads recently.
Yesterday, Trump posted on Truth Social, saying "I'M BACK! #COVFEFE," which was also accompanied by a photo of the former president at his Mar-a-Lago property in Florida. "Covfefe" is in reference to a typo Trump made on Twitter that has since become famous.
The post seemed to grab investor enthusiasm, because more involvement from Trump on Truth Social would likely boost engagement on the app, considering Trump's huge social media following. Trump has also said recently that he has no intention of returning to Twitter even if new owner Elon Musk were to allow him back on the platform.
Furthermore, Truth Social also recently rose to the top ranks of Apple's app store as more users were granted access to the platform. Downloads are reportedly up tenfold.
While both events mentioned above are undoubtedly good for Truth Social, I still have my doubts.
Not only have there been technical issues and high-level executive departures from the company, but hedge fund Kerrisdale Capital Management is shorting Digital World Acquisition Corp. on the belief that it will not receive regulatory approval to merge with Truth Social's parent company, Trump Media & Technology Group (TMTG).
The SPAC is already under investigation by the Securities and Exchange Commission (SEC) for how it communicated with TMTG prior to announcing the deal. Kerrisdale also said that one of DWAC's sponsors is a Chinese company that has seen three of its previous SPACs killed by the SEC. For all of these reasons, I would not recommend buying DWAC.