Digital World Acquisition (NASDAQ:DWAC) stock fell over 6% overnight as doubts grew about its acquisition of Trump Media & Technology Group, owners of the social media site Truth Social.
Former President Donald Trump, who created Trump Media after being banned from Twitter, has resumed his use of the site, now known as X, after being booked in Georgia for election interference.
Without an exclusive on Trump’s social media use, Truth Social may not have much to offer investors. DWAC was trading early this morning at $13.06, still well above its liquidation price of $10. The market capitalization is still over $500 million.
DWAC Stock: No Trump, No Deal
DWAC announced on Aug. 23 that it was postponing an Aug. 24 meeting designed to give it more time to complete the Trump Media deal.
DWAC faces a Sept. 8 deadline to either complete a transaction or liquidate. Liquidation would mean returning the $300 million it raised from investors in its September 2021 public offering. The company now says stockholders must vote by Sept. 5 on its measure to delay the liquidation.
In July, DWAC agreed to pay regulators $18 million on insider trading charges related to the original deal, revising its filings to comply with securities laws. The fine would be paid upon completion of the transaction.
DWAC also failed to deliver an earnings report for the June quarter. This put it out of compliance with the Nasdaq’s listing rules.
Under the current merger agreement, Trump will have majority control of the common stock and control over all shareholder measures, even if he sells his stake.
At one time, DWAC traded at $97 per share on euphoria over Trump and the chance to build an avowedly conservative online community. Since then, however, Elon Musk has bought Twitter/X and invited conservatives, including Trump, back onto the site.
Since its launch, Truth Social’s app has been downloaded about 6 million times.
What Happens Next?
While Trump Media would welcome the cash infusion, it’s hard to see how investors can profit at this point. Liquidation might be a better outcome.
As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
