DWACW - Good News For Trump's Digital World

2023-03-27 10:00:00 ET

Summary

• Raising my rating.
• Could be the best case scenario.
• Here’s why….

Digital World Acquisition

Digital World (DWAC) has had a rough time since I initiated coverage .

For background, I followed up on my initial idea here , here , and here . What has happened since?

Donald Trump

Donald Trump remains in the news. As of this writing, he is the frontrunner in the polls for the 2024 Republican presidential nomination, up by about 15% in the poll average according to RealClear Politics. He is essentially tied with Ron DeSantis in prediction markets, both around a 40% chance of securing the nomination.

He may be in a bit of legal jeopardy, but that has been a constant for decades and doesn’t appear to detract from his appeal. In perhaps the greatest headline in the history of Seeking Alpha,

Trump SPAC DWAC gains amid speculation former president may be arrested Tuesday

This is not a headline that I could imagine being written about any other company insider.

What’s Next?

Perhaps a Trump return to Facebook ( META ) and Twitter (nee TWTR). His campaign asked them to unlock his account so he could return. This could be a problem for Truth Social, DWAC’s target.

Not proxy approval.

To our knowledge, there has been no communication of any kind from [the SEC’s] Corp Fin to DWAC since June 21 of last year, despite repeated inquiries.

- S. Michael McColloch , attorney for TMTG, the DWAC SPAC target

He accurately describes the SEC’s (non) action as a “pocket veto.” He dislikes that they 1) are Democrats who 2) don’t trust Trump and who 3) won’t approve DWAC’s proxy. He thinks that they aren’t doing their jobs. They, on the other hand, think that this vetting of legitimate and illegitimate proxies is their job. Trump’s lawyers demanded a response to their inquiry into why the SEC is ignoring them. The SEC ignored this demand.

Caveat

Donald Trump is a master at getting earned media. He knows how to stay in the press. Truth Social is a social media company so the press helps, whether that is press about Trump going to the White House or the big house.

Conclusion

The worst case scenario for DWAC equity holders is if this SPAC actually manages to close the deal (price target $0.00ish) instead of liquidate (price target $10.52ish). But recent developments appear to indicate that the Trump deal hasn’t secured either 1) Trump or 2) a deal. So the good news is that holders will probably be left with $10 and change. Raising my rating from strong sell to sell. Directors or officers left this one in November, December, January, and March (no explanation for the lack of turnover in February). You might want to, too.

TL; DR

DWAC is probably worth less; DWACW warrants are probably worthless.

For further details see: