Digital World Acquisition Corp (DWAC), the special purpose acquisition company (SPAC) set to take Donald Trump’s Truth Social media platform public, has seen its stock price surge in recent days following key political events.
Trump’s Decisive Iowa Caucus Win Sparks Rally
DWAC shares jumped over 50% on January 16th after Trump scored a decisive victory in the Iowa Republican caucuses, the first nominating contest of the 2024 election cycle. With over 97% of the vote counted, Trump took over 70% of the Iowa vote, trouncing his nearest rival, Florida Governor Ron DeSantis.
The emphatic win established Trump as the clear frontrunner for the 2024 Republican nomination and sparked a rally in DWAC shares, which closed at $19 on January 13th before surging to over $29 on January 17th. Analysts pointed to the Iowa results as confirmation of Trump’s continued popularity with the Republican base and a positive signal for Truth Social’s growth prospects.
“Trump’s dominance in Iowa shows his brand remains strong with core GOP voters, which bodes well for Truth Social’s ability to attract a large conservative user base,” said FinTech analyst Ronald Shepherd. “The performance of this SPAC is closely tied to Trump’s political fortunes, at least in the near term.”
DeSantis Exits Race, Endorses Trump
After disappointing results in Iowa and New Hampshire, Ron DeSantis announced on January 21st that he was suspending his campaign and endorsed Trump’s 2024 bid. The news sparked another rally in DWAC, with shares jumping over 30% to new 14-month highs.
Analysts pointed to DeSantis’ exit and endorsement as pivotal moments that reinforced Trump’s position as the prohibitive favorite for the Republican nomination. A clear path to the 2024 ticket is seen as positive for Truth Social’s growth outlook amongst Trump’s supporters.
“This essentially locks in Trump as the GOP nominee, absent something totally unforeseen,” said Washington-based political strategist Claire Howell. “That level of support will drive user growth for Truth Social.”
Table showing DWAC stock moves:
|Trump wins Iowa caucus
|DeSantis exits race, endorses Trump
Regulatory Risks Remain
However, analysts cautioned that risks around the DWAC deal still exist, primarily related to regulatory approvals needed to close the merger. The SEC and FINRA are reportedly investigating DWAC over talks between Trump representatives and the SPAC prior to its IPO. If rules were broken, it could endanger the deal.
There are also no guarantees Truth Social will succeed even with Trump on the 2024 ticket. The app has struggled with technology issues and stalled user growth since its high-profile launch in 2022. Executing effectively on the product roadmap will be critical to drive user engagement.
“The regulatory overhang persists, and there are still questions around Truth Social’s ability to gain traction,” said Tech IPO expert Stacy Winston. “Long-term business execution risks remain for this very politically-driven story.”
What’s Next: Potential Merger Approval in Q2
The key upcoming catalyst will be shareholder votes to approve the merger, which could come as early as May 2023. A successful vote would pave the way for the DWAC deal to close soon after. Additional details on user metrics, revenue growth and platform updates will also be monitored closely.
Most Wall Street analysts remain neutral to negative on DWAC given the binary regulatory risks and product execution uncertainty. However,crypto investors and retail traders continue to pile in to bet on Trump’s political resurgence. DWAC shares are likely to remain volatile based on political news and merger updates over the coming months.
In summary, Donald Trump’s strong political positioning has sparked substantial rallies in shares of the SPAC taking his Truth Social platform public. However, risks around deal approvals and business execution linger. DWAC’s stock is likely to continue trading on political sentiment in the near term as the 2024 campaign season heats up.
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