Digital World Acquisition Corp. (DWAC) Stocks dived early Wednesday as the special purpose vehicle suffered a setback after Tuesday’s midterms election was read by some as a rejection of candidates backed by former President Donald Trump.
With several key races still undecided, Republicans appear poised to secure a narrow majority in the US House of Representatives. The election results, however, fell far short of the GOP’s expectations of a “red wave” that would bring majorities to both houses of Congress. With a number of Trump-backed candidates underperforming, several Republican political observers have hypothesized that voters have angered the former president.
DWAC aims to bring the former president’s technology and social media platform to the public in a sort of reverse merger that was popular a few years ago. DWAC stock was down 19% in Wednesday market trading. Shares soared nearly 70% Monday on news that Trump will announce another run for the White House this month.
At a rally Tuesday night in Ohio, Trump said he would make a “very big announcement” next week.
“I’m going to make a very big announcement on Tuesday, November 15,” Trump said before the first election results came in.
DWAC stock and the Trump brand
The future of DWAC and its efforts to take Trump Media and Technology Group public are closely tied to the value of the Trump brand. Trump Media is the parent company of conservative social media platform Truth Social.
The victories of 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 dwindling performance, as Mehmet Oz lost his bid for the Pennsylvania Senate and Trump’s protégé Kari Lake was late in the race for the still-undecided Arizona governor.
Given the doubts raised by the interim results, another presidential bid is the clearest short-term way to boost Trump’s brand appeal.
DWAC shares soared late last week after the SPAC delayed – for the sixth time – a shareholder vote on whether to approve a one-year extension to complete the merger with Trump Media.
The shareholders’ meeting is now scheduled for November 22nd. Originally, DWAC’s deadline for completing the merger with Trump’s company was early September. However, SPAC has claimed that an investigation into the transaction by the Securities and Exchange Commission delayed the process.
DWAC financial difficulties
Because DWAC shareholders were unable to complete a vote in September, SPAC sponsor, ARC Global Investments, contributed approximately $2.9 million to extend the merger deadline to Dec. 8, federal filings show. The vote ordered by DWAC management offers shareholders an opportunity to extend the deadline to September 8, 2023.
Now that DWAC has the funding, the SPAC has until December 8 to get the votes to approve the extension.
DWAC has warned investors that the company could potentially go out of business and liquidate shares if the one-year extension is not granted.
Federal files also show the SPAC is bleeding cash. In an SEC filing, DWAC said it received termination notices from investors between September 19 and September 23 on approximately $139 million of private public equity investments (PIPE).
This comes after DWAC reported in its Aug. 23 earnings report that it lost $6.2 million in the first half of the year.
DWAC stock with Musk in charge of Twitter
DWAC stock performance this week comes as follows Tesla (TSLA) boss Elon Musk is now officially responsible for Twitter.
Musk began running the social media platform with mass layoffs, cutting roughly 50% of the company’s workforce. He also introduced a $7.99 monthly fee that includes blue check verification and other social media perks.
Musk sold 19.5 million shares of Tesla for $3.95 billion on Nov. 4, 7 and 8, according to SEC filings late Tuesday. The decision to sell some of his Tesla shares comes just days after Musk completed his $44 billion purchase of Twitter.
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Musk has signaled that people who have been banned from the social media platform, including Trump, may be reinstated. This could be a death knell for Truth Social, but Trump has said he plans to remain on his platform.
“I’m sticking to the truth. I like it better, I like the way it works. I like Elon, but I’m sticking to the truth,” Trump told Fox News Digital in late October.
DWAC stock far from highs
Truth Social launched after Twitter shut down Trump’s account following the Jan. 6 riots in the US Capitol. Some industry observers claim that a return to Twitter could divert a large portion of Truth Social’s audience to the mainstream channel.
DWAC stock is down 90% from its Oct. 22, 2021 peak of 175 shortly after news of the Trump merger first broke.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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