The stock price of Digital World Acquisition Corp Class A, a shell company (acquired for the purpose of merging with the parent company Truth Social, the social media platform of former President Donald Trump), rose by 64% during Monday’s intraday session, following the suspension of the presidential campaign by Florida Governor Ron DeSantis.
The company, which is a special purpose acquisition company (SPAC), has become somewhat of an indicator of Donald Trump’s political strength in the pre-election season of the Republican Party. After Trump’s landslide victory in the Iowa caucuses last week, Digital World’s shares increased by 29%.
According to DeSantis, “It is clear to me that the majority of Republican primary voters want to give Donald Trump another chance.” The stock value has doubled so far this year.
The attractiveness of the stock lies in being one of the few opportunities to speculate on Trump’s fortunes. “The pricing is based on the results in Iowa as well as news surrounding DeSantis,” said Matthew Tuttle, founder and CEO of Tuttle Capital Management, which manages a $15 million ETF focused on SPAC companies. “Who knows what New Hampshire will bring,” he added, referring to the Tuesday primaries in the state.
Digital World made its debut on the stock market in September 2021. Shortly after, plans for a merger with the Trump Media and Technology Group, the owner of Truth Social and a rival to Twitter and other social media platforms, were announced. The proposed merger was put on hold as the government conducted an investigation into Digital World’s potential violations of securities regulations.
SPACs are companies created to raise funds for the acquisition of private companies or other businesses. They provide a faster way for a company to go public compared to a traditional initial public offering (IPO) and are subject to less regulation.
In November 2021, Digital World reported a loss of $20 million, or 54 cents per share, for the exact nine-month period ending on September 30, which was nearly double the $10.1 million, or 27 cents per share, loss in the same period the previous year. SPACs, as non-operating companies, often generate losses before merging with potential targets.
Eric Swider, CEO of Digital World, declined to comment.
Tuttle suggests caution regarding the sudden surge in Digital World’s stock. “If something doubles in five days, you have to be cautious,” says Tuttle. “Take meme stocks like GameStop and AMC Entertainment, and multiply it by a hundred.”
SPACs anticipate that their shareholders will have the right to redeem their shares back to the issuer before the completion of a merger, usually at a price of $10 per share. This means that the stock price of Digital World has a floor, although the gap between the value of the shares and their current price is significant.
According to Tuttle, short-term expectations are for a further 7% sell-off of Digital World’s stock. While that is a high figure, it is not excessive. However, there is skepticism about the chances of success for Trump Media in the long run. “Now that Trump has permission to return to Twitter, and Elon Musk owns it, I don’t see the need to use Truth Social.”
FAQ Section Based on Main Topics and Information Presented in the Article:
Q1: What is Digital World Acquisition Corp?
Digital World Acquisition Corp is a shell company acquired for merging with the parent company Truth Social, the social media platform of former President Donald Trump.
Q2: How did the decision of the Florida Governor affect the stock price of Digital World?
The decision of Florida Governor Ron DeSantis to suspend his presidential campaign caused the stock price of Digital World to increase by 64% during the intraday session.
Q3: What are the expectations for Digital World in the political context?
Digital World has become an indicator of Donald Trump’s political strength in the pre-election season of the Republican Party.
Q4: What are the plans of Digital World regarding the merger with Trump Media and Technology Group?
Digital World planned to merge with Trump Media and Technology Group, the owner of Truth Social, a rival to Twitter and other social media platforms. However, these plans were put on hold due to a government investigation into potential securities regulation violations.
Q5: What is a SPAC?
SPAC (Special Purpose Acquisition Company) is a company created to raise funds for the acquisition of private companies or other businesses. It provides a faster way to go public compared to a traditional initial public offering.
Q6: What are the forecasts for Digital World’s stock?
According to representatives from SPACs, shareholders are expected to have the opportunity to redeem their shares back to the issuer at a price of $10 per share. However, the stock price of Digital World has a floor, and the gap between the value and the current price of the shares is significant.
Related links:
– Digital World Acquisition Corp
– Trump Media and Technology Group
The source of the article is from the blog mivalle.net.ar