Digital World Acquisition Corp. (NASDAQ:DWAC) is getting attention in the financial press today, but stock traders need to be aware of the risks—which include politics, delays, and non-compliance—that could potentially lead to share-price instability. Overall, I am neutral on DWAC stock and don’t recommend buying or short-selling it.
Digital World Acquisition Corp. is a shell/blank-check company that plans to take former U.S. President Donald Trump’s media business, Trump Media and Technology Group (TMTG), public via a SPAC reverse merger. Because of Trump’s indirect involvement with Digital World Acquisition, some stock traders may have difficulty separating their political beliefs from DWAC stock.
I fully understand this challenge, but today I invite you to remain objective and focus on the risks versus the prospective benefits of holding Digital World Acquisition stock in 2023’s second half. As we’ll discover, there’s a lot going on with this shell company and TMTG, and some of it might convince you to stay out of the trade completely.
Delays May Frustrate Shareholders
Month after month, DWAC stockholders have waited for Digital World Acquisition’s reverse merger with TMTG to happen. These things take time, no doubt, but it’s unusual for a SPAC merger to take this long.
Adding to the frustration is the fact that the Digital World Acquisition doesn’t pay any dividends to long-term shareholders. Furthermore, DWAC stock hasn’t trended upward over the past year or two, so some investors might be tempted to drop out.
In addition, Digital World Acquisition has reportedly asked the shareholders to delay the deadline for closing the SPAC deal by an additional 12 months. The original closing date was supposed to be September 8, 2023, but it appears that Digital World Acquisition’s management seeks to push the date forward to September 8, 2024. The blank-check company issued a dire warning, stating, “If more of our stockholders do not promptly vote for the Extension, we will be forced to liquidate on September 8, 2023.”
That’s not the only delay that some shareholders might find alarming. Apparently, Digital World Acquisition may not have submitted its expected quarterly financial filing in a timely manner.
Reportedly, the NASDAQ (NDX) exchange notified Digital World Acquisition of the shell company’s non-compliance with the exchange’s listing rules. This occurred because Digital World Acquisition allegedly failed to file its quarterly report for the period ending June 30, 2023, with the Securities and Exchange Commission (SEC).
This appears to be turning into a pattern, as Digital World Acquisition had also reportedly failed to file its quarterly report for the period ending March 31. Currently, the blank-check company plans to submit an updated compliance plan to the NASDAQ exchange by September 5, so stay tuned for updates on this ongoing story.
A Mugshot, but No “Trump Slump” for DWAC Stock
Whenever you’re analyzing politically charged stocks, you should always expect the unexpected. This is certainly the case with Digital World Acquisition Corp. and TMTG, as the former president is known for commanding attention and making the front page of the news.
Even though you should expect the unexpected, here’s a plot twist you might not have seen coming. As you may be aware, Trump has had a rocky relationship with the X (formerly known as Twitter) social media platform. Indeed, Trump is seeking to offer an alternative to X with TMTG.
Yet, Trump just returned to X/Twitter after a prolonged absence from the platform. The circumstances surrounding this are, to say the least, highly unusual. Reportedly, the former president booked himself into Georgia’s Fulton County Jail after being charged with an indictment.
Trump posted his mugshot from the Georgia jail on the X platform, and it’s currently circulating on other social media platforms and throughout the media generally. Can you guess how the stock market reacted to this development?
It may be counterintuitive, but DWAC stock moved up moderately and was in the green in the middle of the trading session. Still, this might just be a head-fake stock move or even the proverbial calm before the storm. We’ll just have to wait and see how all of this plays out.
Conclusion: Should You Consider DWAC Stock?
Obviously, there’s a lot going on with Digital World Acquisition Corp. and TMTG. There’s the proposed delay of the SPAC deal’s closing. Also, Digital World Acquisition Corp. seems to have run afoul of the NASDAQ exchange’s compliance rules.
In case all of that wasn’t enough to stir the pot, there’s a presidential mugshot (a historical first, I think) circulating around the internet now. Clearly, the future is unpredictable when it comes to Digital World Acquisition. Therefore, I don’t recommend buying or short-selling DWAC stock since there’s too much headline risk, and the share price could move quickly in either direction.