- DWAC advances 17.8% on Wednesday.
- Digital World Acqusition has been cleared for a merger vote with Trump Media on Friday.
- DWAC added nearly 4% more afterhours.
- The SPAC is now trading near $1.6 billion.
Digital World Acquisition Corp (DWAC), the beleaguered special purpose acquisition company (SPAC) that has spent years trying to merge with Donald Trump’s social media company, saw its stock skyrocket more than 20% at some point on Wednesday. The DWAC price action comes as the market gears up for a shareholder vote on Friday that is expected to finally result in a merger for the SPAC with Trump’s Truth Social company.
The broader market was broadly flat around lunchtime in New York, but bounced higher following Fed Chair Jerome Powell's press conference after the central bank held rates constant. The S&P 500 gained 0.89%, while the NASDAQ advanced 1.25%.
DWAC added 17.8% by the close on Wednesday and then rose another 3.85% afterours to $44.55.
DWAC stock news
Investors are excited for the long-awaited merger with Trump Media & Technology Group (TMTG) to finally go through. After being held up for the better part of three years for various reasons, the most recent holdup was on account of two TMTG co-founders suing to stop Donald Trump from diluting their stake.
Andy Litinsky and Wes Moss held an 8.6% share of TMTG ownership, which they believe Trump is attempting to dilute so he can control a much larger bounty from the impending merger.
However, on March 9, Delaware Chancery Court Judge Sam Glasscock III said the shareholder vote can go forward on March 22. The merger was originally agreed to in October of 2021.
Previously, the federal government had announced an investigation into the creation of DWAC, which delayed the combination. But in mid-February, the Securities & Exchange Commission (SEC) rested its case and said the merger could proceed.
DWAC is currently valued at $1.6 billion, but post-merger, the combination could be worth much more. Donald Trump owns approximately 90% of TMTG. The new company will be called Trump Media & Technology Group Corp. and will trade under the TMTG ticker.
Meme stocks FAQs
Meme stocks are stocks favored by retail traders – but not by professional or institutional traders – that grow popular through its backers publishing memes on social media websites to win converts. Images or GIFs are typically used to transmit some type of excitement, committment or comedy regarding investment in the stock. These stocks normally are beaten down names that appear to have an uncertain or dour future based on falling sales figures or rising losses. Interest in these names normally comes from either belief in a turnaround story or its heavy short ratio.
Online investing forums like Reddit’s r/WallStreetBets are known to be breeding grounds for meme stocks. Normally, some small group of posters begin making memes of a stock they are buying. If the argument behind it is cogent or even just funny, the memes may provoke other retail investors to jump aboard. Interestingly, the merits of a stock are normally immaterial to it becoming a popular meme stock other than it being abandoned by the wider market and thus cheap. Stocks with high short ratios are usually likely to become meme stocks, because the nature of the argument for investing in the stock is that it can be the subject of a short squeeze.
A short squeeze is when investors swiftly buy up the shares of a heavily-shorted stock. Because the stock is heavily shorted, there is a dearth of available shares to purchase. This allows smaller volumes of buying to push the stock’s price up more easily. Since the share price suddenly rises, short-sellers need to purchase the stock to close out their short positions. This rapid buying and closing of short positions produces an unusually low level of supply that causes the price of the stock to rise rapidly. This type of short squeeze was the result of the first meme stock craze regarding GameStop.
Besides GameStop – the ur-meme stock – there have been a number of other meme stocks. Two of the most popular are AMC Entertainment and Bed Bath & Beyond. AMC CEO Adam Aron used the popularity of AMC shares among the retail class to effect a secondary offering that raised enough money to stave off bankruptcy during the 2020-2021 pandemic. Bed Bath & Beyond saw a flurry of volatile trading but eventually went bankrupt in April 2023.
DWAC stock forecast
DWAC has been in a slump all month, though its price action has largely moved sideways. This is surmised by the short-term blue moving average trending beneath its middle-term purple moving average. Still, bulls do not look like they’re ready to give up, which is attested to by Wednesday’s price spike.
Wednesday’s session witnessed a break and close above both the 9-day Simple Moving Average (SMA) (blue) and its 21-day counterpart (purple). From here, the next target will be the $50 psychological level, which has served as both support and resistance on several occasions since mid-February.
Above there, the January 23 and February 15 sessions featured resistance near or above teh $56 level.
DWAC daily chart
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