Donald Trump is one of the world's most famous businessmen, but his companies have usually been privately held. Now investors have the chance to throw their lot in with the former president of the United States through Digital World Acquisition (DWAC). It got pummeled on the news that Tesla (TSLA) CEO Elon Musk had a bid accepted to buy Twitter (TWTR). The stock saw recent gains fade after Trump announced he will run again for president.
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The special purpose acquisition company (SPAC) is being used as a vehicle to take the Trump Media & Technology Group public. When the merger is complete it is likely to trade on the Nasdaq under the ticker "TMTG." The intended time frame for merger completion has not been publicly disclosed, but Digital World Acquisition has just sealed a one-year extension to complete the deal.
Trump has boasted that he will offer a "Big Tent" platform as he attempts to take on technology giants such as Twitter and Facebook parent Meta Platforms (META). But it has some regulatory hurdles to overcome and has just asked for a merger delay
So, is the ultimate Donald Trump stock a buy now?
Donald Trump On DWAC
Digital World Acquisition is to serve as a vehicle to take the Trump Media & Technology Group public via a merger.
Trump, who has struggled to reach his audience via social media since the Jan. 6 Capitol riot, unveiled his vision for the company in October 2021.
"Unlike with the Big Tech platforms, there will be no shadow-banning, throttling, demonetizing, or messing with algorithms for political manipulation," Trump said in a statement. "We will not be treating users like lab rats for social experiments, or labeling alternative views as 'disinformation.'"
DWAC Gets Merger Delay Boost
DWAC stock was hit after it emerged that the firm was asking shareholders to approve a one-year extension for it to finish its business merger with Trump Media and Technology Group.
But, after multiple delays, the stock got a boost after the key shareholder vote finally went in the company's favor.
Executives at Digital World, which is led by Patrick Orlando, now have until Sept. 8 of next year to complete the deal after shareholders approved the delay.
Truth Social Rollout Continues
Truth Social, a platform touted as an alternative to Twitter, launched on Presidents Day, which fell on Feb. 21.
While it took some time for Trump himself to become fully engaged with the platform, he now looks to be posting daily.
The service also took a step forward with the launch of its web version at the end of May. Users can now logon and use the service without having to use their iPhone.
And Truth Social got another boost after the app was approved for download on the Google Play Store for Android users on October 12. It had previously been rejected in August due to insufficient content moderation.
The Truth Social app, which courts conservatives, allows users to follow others and trending topics. Instead of a tweet users share a "TRUTH."
It is the first plank of a three-stage launch of Trump Media products. It will follow this up with the launch of the TMTG+ subscription video-on-demand service. Finally, the firm is aiming to launch its own podcast network.
In an investor presentation the firm estimated it will have 16 million users and 800,000 monetizable users on Truth Social in 2022.
The firm expects Truth Social average revenue per user can grow to $13.50 by 2026. It also expects to have 81 million users by then. This compares to Twitter's current average revenue per user of $23.76.
It is guiding for 40 million TMTG+ subscribers by 2026. The average monthly fee per user is seen hitting $9 that year.
Elon Musk Completes Twitter Deal, Makes Trump Offer
Truth Social's biggest competitor is Twitter, and the latter company got a massive boost after Tesla CEO Elon Musk decided to buy the company. In contrast, DWAC got battered.
In April the tech billionaire reached a deal to acquire the company for 54.20 a share. After trying to back out of the deal he changed course earlier in October.
The eccentric executive has now purchased the company for the originally-agreed $54.20 per share. The total price tag equates to about $44 billion.
Musk has already moved to CEO Parag Agrawal and CFO Ned Segal. The firm's head of legal policy, trust and safety Vijaya Gadde has also been given the chop.
After previously speaking about the possibility of the former president rejoining his platform, Elon Musk has opened the way for Trump to return to the platform.
He reinstated the former president's account on Nov. 20 after a public vote. The Twitter poll, which received more than 15 million responses, saw 51.8% vote in favor of Trump's return.
Trump Loves Truth
In a Truth Social post on Oct. 28, Trump said he is "very happy that Twitter is now in sane hands." He also underlined his dedication to his own platform, saying, "I LOVE TRUTH!"
And he seemed to be sticking to his guns when he addressed a possible return to Twitter at the Republican Jewish Coalition's annual leadership meeting Nov. 19.
"I don't see any reason for it, they have a lot of problems at Twitter, you see what's going on. It may make it, it may not make it," Trump said.
Trump has consistently committed himself to his own site, which is important to the future of his own product given he is a massive social media draw.
"I am not going on Twitter, I am going to stay on Truth," he told Fox News in April. "I hope Elon buys Twitter because he'll make improvements to it and he is a good man, but I am going to be staying on Truth."
With Trump running for president once again it could give his platform a boost in traffic and sign-ups.
Trump Media Makes Moves
Trump Media & Technology Group made a slew of announcements as it geared up for its big launch.
On Dec. 4 it announced $1 billion in investments from institutional investors. The capital is to be received upon consummation of the merger.
Trump said this "sends an important message to Big Tech that censorship and political discrimination must end."
"America is ready for Truth Social, a platform that will not discriminate on the basis of political ideology," he added.
On Dec. 6, it said Congressman Devin Nunes was joining the firm as its CEO. The firm also announced in December that it has established a partnership with video streaming firm Rumble.
Trump Media said it had a "wide-ranging technology and cloud services agreement" with Rumble. It will operate part of the Truth Social network as well as its video-on-demand service, TMTG+.
DWAC Stock Has To Clear This Hurdle
The company also revealed in a December filing that the Securities and Exchange Commission and the Financial Industry Regulatory Authority asked it for information about stock trading and communications prior to the merger being announced.
The disclosure came after Sen. Elizabeth Warren, D-Mass., called for the SEC to conduct a probe.
In a letter, she questioned whether the company and Trump "may have committed securities violations by holding private and undisclosed discussions about the merger as early as May 2021, while omitting this information in U.S. Securities and Exchange Commission (SEC) filing and other public statements."
But according to DWAC filings, the investigations were launched by the SEC and FINRA before Warren submitted her request.
The company has said in prospectuses that it did not have "substantive discussions, directly or indirectly, with any business combination target."
More Legal Woes For Donald Trump Stock
DWAC took another beating on news that several board membershave been subpoenaed.
A federal grand jury in the Southern District of New York is seeking more details on its merger deal with Trump Media & Technology Group.
In a June 27 filing, DWAC said the subpoenas, as well as investigations from the Justice Department and the SEC, risk slowing or squashing the merger deal altogether.
According to DWAC, it became aware of the grand jury subpoenas on June 16. The grand jury is requesting similar details to those previously requested by the SEC.
DWAC Stock Analysis
The IBD Stock Analysis shows inherent problems with the stock.
It has seen its Relative Strength Rating plunge to 12 out of 99, which puts it in the bottom 12% of stocks in terms of market performance over the past 12 months.
DWAC stock surged more than 66% on Nov. 7 amid reports Trump is preparing to announce a presidential bid by the end of November. It then plunged after his midterm election picks floundered at the polls. DWAC battled back again before reversing sharply after Trump announced a 2024 presidential run. Nevertheless, the stock ended November up just over 36% in November. So far in December it has fallen around 7%.
It is now close to another test of its 50-day moving average after recently clearing the level. DWAC previously triggered a sell signal by plunging below this key benchmark.
It now sits well off its all-time high of 175, which it reached in October 2021. DWAC stock has fallen in seven of the past nine full months.
The hype around Trump vaulted the stock to dizzying heights before it plummeted back to Earth.
Donald Trump Stock Misses This Key Ingredient
But the CAN SLIM cognoscenti look for stocks that boast consistent earnings growth. This is where DWAC stock falls short. Its lack of earnings has netted it an EPS Rating of 2 out of 99.
In addition, there are no analyst earnings estimates for the ultimate Donald Trump stock.
Given the company has yet to fully rollout a product, this is a totally speculative play. It is a bet that the firm will be able to turn its hype into earnings performance.
While this is certainly possible, there are lots of hurdles along the way. Not least the fact Trump is entering an arena dominated by giants such as Facebook, Twitter, TikTok and Snap (SNAP).
On the plus side, institutional sentiment is improving. It holds an Accumulation/Distribution Rating of B-, which reflects more buying than selling in recent weeks. Overall fund ownership still remains extremely low however, currently coming in at 4% of shares.
DWAC Stock No Ordinary SPAC
Firms that went public via mergers with special purpose acquisition companies have struggled so far in 2022.
Speculative stocks in general have been getting punished as the Federal Reserve dials back its accommodative policies.
But DWAC has been outperforming other SPACs by quite a margin. In fact, it is the best performing SPAC stock ever, according to SPAC Research.
It is worth bearing in mind that SPACs have underperformed against the broader market by 25% during the past decade, according to University of Florida IPO expert Professor Jay Ritter.
According to MSCI, SPACs are able to go public more quickly and inexpensively, and with "far less regulatory or investor scrutiny." They are alsomore likely to be managed by a controlling shareholder than conventional IPOs.
"In most other regards, however, investors in these SPAC combination companies faced essentially the same corporate governance risks as investors in any other recent IPO," analyst Nilufar Kuchimova said in a research note.
Is The Ultimate Donald Trump Stock A Buy Now?
Right now, buying DWAC stock is more akin to gambling than investing. The firm has no earnings history to speak of and its stock price been plunging for months. The fact that Elon Musk, one of the world's most feted entrepreneurs, has now bought Twitter makes the road ahead for Truth Social even more challenging. The stock made big gains amid speculation Trump will run for office, but these faded after he confirmed a new presidential run.
While it managed to get a one-year extension to complete the merger further challenges remain. With an ongoing SEC investigation into the deal, there is still a risk that it could be halted in its tracks. A new federal grand jury investigation further complicates matters. DWAC stock is not a buy at the moment.
Investors looking for true market leaders should check out IBD Stock Lists, including theIBD 50 list of top-performing stocks.
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