What happened
Shares of Digital World Acquisition Corp (DWAC) fell nearly 17% in May, according to data provided by S&P Global Market Intelligence.
DWAC is a special purpose acquisition company (SPAC) that is planning to merge with and take public Trump Media & Technology Group (TMTG), the parent company of Truth Social, a social media platform backed by former president Donald Trump. The belief is that the platform will be able to cater to Trump's audience and those fed up with mainstream social media platforms.
While DWAC may have fallen due to broader market activity, there was no shortage of news regarding TMTG and Truth Social in May.
So what
In May, DWAC filed its S-4 registration statement with the Securities and Exchange Commission, another step toward completing the merger with TMTG, which has raised some suspicions due to various short reports and regulatory scrutiny.
Image source: Getty Images.
In April, the hedge fund Kerrisdale Capital revealed that it had taken a short position in DWAC on the belief that the SPAC will not receive regulatory approval from the SEC to merge with TMTG. At the time of announcing the short position, Kerrisdale tweeted:
The SEC has been handed a prime opp to send a message to the industry. Not only is $DWAC and TMTG high-profile, but the deal involves a repeat offender. $DWAC's sponsor is an obscure Chinese firm that has seen three of its shell companies killed by the SEC in the past.
At the end of last year, DWAC disclosed in a regulatory filing that various regulators such as the SEC had requested information regarding certain trades made around the announcement of the deal, and over communications prior to announcing the deal.
Toward the end of May, DWAC also issued a new filing that said current shareholders may be looking to sell 100 million shares.
Now what
It's been a roller coaster of a ride for DWAC. Upon announcing the deal with TMTG, the stock soared from roughly $10 all the way to more than $94 per share. Currently, shares trade at around $45.
The actual platform has also had its fair share of problems, including tech issues and the departure of high-level executives. On the other hand, as of a few weeks ago, the app had roughly 1.4 million downloads since launching in February.
But with lots of volatility, very limited financial projections, and potential regulatory issues, this is not a stock I am interested in.
