Digital World Acquisition Corp Stock News and Forecast: Donald Trump-aligned DWAC pops 28% in premarket

• DWAC stock is spiking in Tuesday's premarket after TRUTH Social began accepting users this weekend.
• TRUTH Social is the conservative social media app owned by Trump Media & Technology Group, which is merging with DWAC.
• Digital World Acquisition Corp's share count is expected to quadruple 30 days after the merger is completed.

As we wrote on Monday and right on schedule, Digital World Acquisition Corp (DWAC) stock is riding high in Tuesday's premarket. DWAC shares are up 28% just under $108 at the time of writing. The reason for the exuberance is that former president Donald Trump's social media startup, TRUTH Social, began allowing app downloads on the Apple Store sometime before midnight on Sunday, February 20. DWAC is merging with Trump Media & Technology Group (TMTG), the parent of TRUTH Social, as soon as March.

Digital World Acquisition Corp Stock News: TRUTH tops free-app rankings

On Monday, the TRUTH Social app was the top free download in Apple's App Store, above competitors like Facebook, Twitter and Youtube that booted the former president from their platforms after the January 6 Capitol riot one year ago. TRUTH Social is being planned as a counterpoint to social media censorship. It joins other conservative, free-speech social media startups like Gab and Parler.

The App Store began allowing downloads of the TRUTH Social app before midnight on the East Coast on Sunday. Those who had previously signed up for the app received automatic downloads. Many others, however, have reported difficulty in signing up or logging in, and a large number have been placed on a waitlist. The app will be fully open to the public sometime in March.

TMTG CEO Devin Nunes told Fox News on Sunday that the platform is "the opposite of some Silicon Valley tech oligarch freak telling people what they want to think and deciding who can or cannot be on the platform.”

Despite the coming euphoria over the launch, there is one major drag on the DWAC share price. Thirty days after the merger is completed, separate shares owned by insiders, underwriters, and private investors who invested in the SPAC's separate PIPE deal (Private Investment in Public Equity) are permitted to begin trading. This means that the current 37 million or so shares available to trade will grow overnight to more than 170 million. Obviously, some of these folks will try to sell, putting downward pressure on the share price.

On top of that there are some 40 million "earnout" shares that get minted to company insiders and owners like the Trump family if the share price remains above $15, $20 or $30 a share in the month after the merger. Then there are the 15 million warrants that could get exercised in September 2022. This means that by 2023 there could be 200 million total shares, which may seem like dilution to current retail investors though this information has been in the public record from the beginning. One short-seller has given DWAC a post-merger price target of $36.

Digital World Acquisition Corp Stock Forecast: $110 is first obstacle

As stated previously, DWAC is trading within an ascending price channel and was currently near the lower trend line. This was a nice setup for a big spike, and Tuesday's premarket price is a demonstration that the price channel remains intact.

DWAC stock is already past the February 7 high of $97.15, and its premarket apex around $108 shows FXStreet's $110 target from Monday is right on track. If DWAC can supersede the top of the price channel at $110, then it may take a stab at the 161.8% Fibonacci level at $134.90. 

 

DWAC 1-day chart

 

First though, DWAC must conquer the minimal resistance that surrounds the $120 level. This stems from where DWAC opened on October 22 and 25 of last year during its first insane share price explosion.

Short-term support is at the 9-day moving average, currently at $83.21, and the 21-day moving average, $78.49. Longer-term support is at $38.

DWAC 1-day chart