Don’t Take a Risk on the Digital World Acquisition Corp. Dumpster Fire

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Whether Digital World Acquisition Corp. (NASDAQ:DWAC) stock isn’t the worst investment ever, I don’t know what is.

The highly publicized Special Purpose Acquisition Company (SPAC) that is supposed to take former President Donald Trump’s social media company public, Trump Media and Technology Group, imploded following the failure of Truth Social, a Twitter (NYSE:TWTR) clone intended to give the former president a public platform after he was banned from most social media following the January 6, 2021 Capitol uprising.

Revelations that no one uses Truth Social and that the future of Trump Media and Technology Group is questionable at best led DWAC stock to plunge 86% from its all-time high of $175 to under 25. $ per share.

DWAC Digital World Acquisition Corp. $24.33

A huge bust

The Truth Social platform has seen a huge meltdown since its launch earlier this year. While Trump Media has told investors that Truth Social will have 16 million users by the end of this year, it now looks like the social media will have the chance to attract even just one million users. .

The main problem is that Donald Trump himself barely uses Truth Social, which begs the question: why would anyone else use it? Trump, after all, was the site’s main draw. However, Digital World Acquisition Corp. has bigger issues than the number of Truth Social users.

It’s not even clear whether regulators will allow the reverse merger that would take Trump Media and Technology Group public. The U.S. Securities and Exchange Commission (SEC) continues to investigate the proposed SPAC deal and whether it is in the best interests of investors.

The SEC subpoenaed documents from Digital World Acquisition Corp. and announced that it was expanding its investigation. While DWAC said its “team has worked tirelessly to complete its proposed business combination,” a firm date for the SPAC deal has not been set.

SPAC slowdown

If the Truth Social bust and SEC investigation weren’t bad enough, the reverse merger between Digital World Acquisition and Trump Media comes at the worst possible time given the steep decline in the entire SPAC market.

Last year, there were a record 613 SPAC listings on US exchanges, raising a combined total of $145 billion, a 91% increase from the amount raised in 2020, according to data from Nasdaq.

But so far this year, only 11 SPAC deals worth $25 million or more have closed through the end of May, and at least 73 SPACs that were planning to go public this year have canceled those plans. More SPACs say they can’t find a company to merge with in today’s market.

The slowdown in SPAC transactions is blamed on deteriorating market conditions, as well as investors becoming increasingly risk averse. This begs the question of what value there would be to the DWAC-Trump Media combination even if it comes to fruition.

Avoid DWAC stocks like the plague

There is no good news regarding Digital World Acquisition Corp. or its planned reverse merger with Trump Media and Technology Group. All news is bad. The only thing worse than the headlines is the performance of DWAC stock, which is down more than 80% from its highs and lows.

With the likelihood that the deal will be thrown into doubt and Trump Media will turn out to be a speculative company at best, there’s no reason for investors to take a risk on this dumpster fire of an investment. DWAC inventory is not A purchase.

As of the date of publication, Joel Baglole had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to publishing guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a reporter for the Wall Street Journal and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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