Digital World Acquisition Corp. stock dropped Wednesday after former President Donald Trump announced Tuesday night he will once again seek the Republican nomination as presidential candidate in 2024.
"In order to make America great and glorious again, I am tonight announcing my candidacy for president of the United States," Trump told supporters during an event at Mar-a-Lago.
DWAC stock fell more than 16% Wednesday during market trading. On Tuesday, before Trump said he would run for president, DWAC shares sank 8.8%. The stock had spiked 11% on Monday and is up nearly 52% so far for November.
DWAC is a special purpose acquisition company which aims to take the former president's tech and social-media platform public in the sort of reverse merger that was popular several years ago. The company reported Monday that it has continued to hemorrhage money. The SPAC said it lost roughly $3.4 million in the latest quarter ending on Sept. 30, according to SEC filings. The group has lost $9.6 million so far in 2022.
DWAC Stock And The Trump Brand
The future of DWAC and its efforts to take Trump Media and Technology Group public are tightly bound up in the value of the Trump brand. Another presidential bid is seen as a big boost for the brand. Trump Media is the parent of the conservative social-media platform Truth Social.
DWAC stock tumbled 20% after last week's midterm elections as Republicans fell well short of expectations. The performance was read by some as a repudiation of candidates backed by Trump. DWAC stock had surged around 70% earlier in the week on news that Trump would announce his run for president.
Wins Tuesday by Trump-backed Senate candidates J.D. Vance in Ohio and Ted Budd in North Carolina helped boost the Trump brand. But a long list of losses raised questions about Trump's potentially fading wattage, with Mehmet Oz losing his Senate bid in Pennsylvania, and Trump protege Kari Lake far enough behind in Arizona's governor's race that Fox News and the Associated Press called the race for her opponent, Katie Hobbs.
Given the doubts raised by midterm results, another presidential run is the clearest short-term path to bolstering Trump's brand appeal.
DWAC stock shot up in early November after the SPAC delayed a shareholder vote — for the sixth time — on whether to approve a year extension to complete its merger with Trump Media.
The shareholders meeting is now set for Nov. 22, but the shot clock is ticking. DWAC's deadline to complete its merger with Trump's company had originally been in early September. However, the SPAC has claimed a Securities and Exchange Commission investigation of the deal delayed the proceedings.
DWAC Financial Difficulty
With DWAC shareholders failing to complete a vote in September, the SPAC's sponsor, ARC Global Investments, contributed about $2.9 million to extend the merger deadline until Dec. 8, according to federal filings. The vote arranged by DWAC management gives shareholders an opportunity to extend the deadline until Sept. 8, 2023.
Now that DWAC has funding, the SPAC has until Dec. 8 to get the votes to approve the extension.
A presidential bid could be enough to urge shareholders to vote to extend the deadline. Otherwise, DWAC has warned investors that if the yearlong extension is not granted, the company could potentially cease operations and liquidate shares.
In an SEC document, DWAC revealed that from Sept. 19 to Sept. 23 it had received termination notices from private investment in public equity (PIPE) investors representing some $139 million. In its quarterly report on Aug. 23 it reported it lost $6.2 million in the first half of the year. And according to its most recent filing, it is continuing to lose millions of dollars.
DWAC Stock With Musk In Charge Of Twitter
DWAC stock's recent volatility comes as Tesla CEO Elon Musk has taken charge of Twitter.
Musk has slashed roughly half of the social media site's staff while tweeting frequently about his plans and politics. Musk has also responded personally to customer complaints and suggestions. There has been widespread confusion over verification features being rolled out and there is speculation the company could enter bankruptcy.
Musk's focus on Twitter is damaging Tesla stock, according to some analysts. Tesla shares have shed more than 10% since Musk took over Twitter on Oct. 28.
Musk also sold 19.5 million Tesla shares for $3.95 billion on Nov. 4, 7 and 8. The decision to sell some of his Tesla stock comes just days after Musk finalized his $44 billion purchase of Twitter.
Musk has been signaling that people who have been banned from the social media platform, including Trump, may be reinstated. This could be a deathblow to Truth Social, but Trump has said he plans to remain on his platform.
"I am staying on Truth," Trump told Fox News Digital in late October.
"I like Elon, but I'm staying on Truth," he added.
DWAC Stock Well Off Highs
Truth Social launched after Twitter shut down Trump's account following the Jan. 6 riot at the U.S. Capitol. Some industry observers contend that a return to Twitter could redirect a large portion of Truth Social's audience to the more mainstream channel.
DWAC stock is down 84% from its Oct. 22, 2021, high of 175, marked just after news of the Trump merger deal broke.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
