Digital World Acquisition Corp. (DWAC) plunged early Wednesday as the special-purpose acquisition firm took a hit after Tuesday’s midterm elections were read by some as a repudiation of candidates backed by former President Donald Trump.
With several key races still undecided, Republicans looked poised to clinch a narrow majority in the US House of Representatives. However, the election results fell far short of GOP expectations of a “red wave” bringing majorities to both houses of Congress. With a number of Trump-endorsed candidates underperforming, several Republican political watchers have speculated that voters have soured on the former president.
DWAC aims to take the former president’s technology and social media platform public in the kind of reverse merger that was popular several years ago. DWAC stock fell 19% in Wednesday’s market trading. Shares soared nearly 70% on Monday on news that Trump will announce another run for the White House this month.
At a Tuesday night rally in Ohio, Trump said he would make a “very big announcement” next week.
“I’m going to make a really big announcement on Tuesday, November 15,” Trump said before the election results started rolling in.
DWAC Stock and the Trump Brand
The future of DWAC and its efforts to publicize Trump Media and Technology Group is closely tied to the value of the Trump brand. Trump Media is the parent of the conservative social media platform Truth Social.
Victories for Trump-backed Senate candidates JD Vance in Ohio and Ted Budd in North Carolina were positive for the Trump brand. But a long list of losses raises questions about Trump’s waning power, with Mehmet Oz losing his Senate bid in Pennsylvania, and Trump protege Kari Lake at the end of the still undecided gubernatorial race in Arizona. .
Given the doubts raised by the midterm results, another presidential race is the clearest path in the short term to bolster the appeal of the Trump brand.
DWAC shares soared late last week after SPAC delayed a shareholder vote – for the sixth time – on whether to approve a one-year extension to complete its merger with Trump Media.
The shareholders’ meeting is now set for November 22. DWAC’s deadline to complete its merger with Trump’s company was originally set for early September. However, SPAC claimed that a Securities and Exchange Commission investigation into the deal delayed proceedings.
DWAC financial difficulties
With DWAC shareholders failing to vote in September, SPAC sponsor ARC Global Investments contributed about $2.9 million to extend the merger deadline to Dec. 8, according to federal filings. The vote organized by DWAC management offers shareholders the option to extend the deadline to September 8, 2023.
Now that DWAC has funding, SPAC has until Dec. 8 to get votes to approve the expansion.
DWAC warned investors that if the one-year extension is not granted, the company could potentially cease trading and liquidate its shares.
Federal documents also show that SPAC is hemorrhaging money. In an SEC filing, DWAC disclosed that between Sept. 19 and Sept. 23, it received termination notices from private public equity investment (PIPE) investors totaling approximately $139 million.
This comes after DWAC announced in its August 23 quarterly report that it lost $6.2 million in the first half.
DWAC Stock with Musk in charge of Twitter
DWAC stock performance this week comes as You’re here (TSLA) Chief Elon Musk is now officially in charge of Twitter.
Musk began running the social media platform with mass layoffs, cutting the company’s workforce by around 50%. It has also implemented a monthly fee of $7.99 which includes blue check verification and other social media perks.
Musk sold 19.5 million Tesla shares for $3.95 billion on November 4, 7 and 8, according to SEC filings late Tuesday. The decision to sell some of its Tesla stock comes just days after Musk completed his $44 billion purchase of Twitter.
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Musk signaled that people who were banned from the social media platform, including Trump, could be reinstated. It could be a fatal blow to Truth Social, but Trump said he plans to stay on his platform.
“I’m staying on Truth. I like it better, I like the way it works. I like Elon, but I’m staying on Truth,” Trump told Fox News Digital in late October.
DWAC stock far from highs
Truth Social was launched after Twitter shut down Trump’s account following the January 6 riot at the United States Capitol. Some industry watchers say a return to Twitter could redirect much of Truth Social’s audience to the more mainstream channel.
DWAC stock is down 90% from its high of 175 on October 22, 2021, marked just after the announcement of the merger agreement with Trump.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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