Why Digital World Stock Has Dropped 13% So Far This Week

What’s going on

Special Purpose Purchase Company (SPAC) Shares Digital World Acquisition Corp. (DWAC -2.86%) It was down 13% for the week through Thursday afternoon ET, according to data from S&P Global Market Intelligence. This is a SPAC that is trying to merge with Truth Social, a social media platform associated with former US President Donald Trump. And Trump himself is in the news this week, not because of his involvement with Truth Social, but more because of his involvement with other platforms.

So what

Truth Social is the platform the former president used after his accounts were banned elsewhere, including Meta platforms‘ Facebook as well as Twitter. Twitter reinstated his account in November. However, at the time, Trump said he would not contact his Twitter account, choosing to stick with Truth Social.

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This may change. According to multiple reports, the former president plans to start using his old accounts on various social media platforms. This includes Twitter. But his office is also asking Meta Platforms to unban his Facebook account.

Investors hoped that Truth Social would thrive because of former President Trump’s exceptional presence on the platform. But now that it can reconnect with bigger platforms, Digital World’s stock is selling off.

Now what

Shareholders have been on a roller coaster ride since Digital World announced its intention to merge with Truth Social in 2021. There is constant speculation about what happened to the former president and the health of the business at Truth Social.

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However, in my view, these things are not the most pressing issues for Digital World shareholders. There are serious questions about whether the merger will ever materialize.

For starters, SPAC shares are required to find and merge with a target business within a predetermined time frame. However, the Digital World is lagging behind the schedule. He has already extended the deadline twice, with the next deadline being March 8. If he misses that deadline, he can vote to extend the deadline two more times, for a total of six months.

In addition, Digital World has lost members of its team in recent months, including two board members and its chief financial officer. The departure of these individuals does not mean that something bad is happening behind closed doors. But undermining executive leadership while trying to reach an agreement is not ideal.

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Trading at more than 50% of its initial public offering price, Digital World’s shareholders have a lot of faith in a company with many unanswered questions. Personally, I would prefer to invest my money in other opportunities until there is more clarity here.

Randi Zuckerberg, former director of market development and Facebook spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Jon Quast has no position in any of the stocks mentioned. The Motley Fool owns and recommends positions in Meta Platforms. The Motley Fool has a disclosure policy.


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