2023-06-14 12:25:55 ET
Summary
- DWAC has trended lower this year amid concerning headlines regarding its listing status and a failure to file a 10-Q in a timely manner.
- With no imminent profitable investment projects detailed, I have a sell rating on the SPAC.
- As former President Donald Trump leads in the GOP polls after facing more legal charges, much uncertainty remains as to the viable future of DWAC.
The SPAC boom peaked two years ago. As IPO activity ran amok across Wall Street, an old type of equity issuance came back to prominence. Along with IPOs, Converts, and Follow-ons, SPACs were a way for capital to be put to work. With SPACs, investor cash is put in a parking spot for the SPAC control entity to select future capital projects. Perhaps the most famous SPAC is the Digital World Acquisition Corp. ( DWAC ).
SPACs Lose Their Luster On Wall Street
Goldman Sachs
The Donald Trump saga continues. The former President was recently indicted on 37 counts , which could land the GOP frontrunner in prison should he be convicted. The 44th POTUS stood in front of supporters last Tuesday night following his arraignment to staunchly defend himself and chastise the allegations against him. Sidestepping political opinion, let's review where things stand with DWAC. I have a sell rating based on a lack of promising investment opportunities and concerning recent news.
For background, the SPAC is a blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses. While DWAC pursues an initial business combination target in any business or industry, it intends to focus on combining with a leading tech company, according to the company's website. But there are no other new details.
As Mr. Trump garners increasing media coverage, more eyes will be on both DWAC and the TRUTH Social app. DWAC has been aiming to merge with the app, which is Trump's media company. Even with the heightened exposure, DWAC is not far from its all-time lows. Making matters worse for DWAC was news late last month, in which the Nasdaq sent the company a notice that it was not in compliance with continued listing standards. That poses an added risk to shareholders. Back on March 31, DWAC failed to file its quarterly report for the period ended March 31 in good time. From the notice date, DWAC has until July 24, 2023, to submit a plan to come back into compliance.
Bigger picture, I don't see encouraging trends with the TRUTH Social app. Its popularity ratings have slipped, according to similarweb.com .
TRUTH Social App Popularity Waning
As far as the election campaign is going for the former President, trends are actually decent. According to RealClearPolitics , Trump holds a commanding lead over Florida Governor Ron DeSantis in a compilation of all the major polling data. Some political pundits assert that the more attacks Trump is hit with, the more his supporters may become emboldened to back him. That's a potential bullish catalyst for DWAC should Trump indeed continue to lead and secure the GOP nomination, potentially just one year away. Of course, there remains uncertainty as to what Trump may do with his social media presence.
Trump Remains The Best-Positioned GOP Hopeful
As a financial analyst, though, I prefer to look at what the money says. According to Predictit.org, the chance that Trump eventually wins the White House once again is not all that impressive. There's about a 1-in-4 chance, per the betting markets. President Biden holds the lead and Gov. DeSantis while lagging steeply in the GOP nomination polls, has nearly an equal chance of winning in 2024 as Trump.
Trump's White House Chances Dipping Lately
Predictit.org
The Technical Take
The technical situation with DWAC is no better than the lack of information regarding its fundamental future outlook and investment opportunities. Notice in the chart below that DWAC has been trending lower for months on end. Moreover, the last several weeks have seen muted volatility. There's been a dearth of bullish pops as experienced at times in 2022. With a falling 200-day moving average and the latest stock price being well under that long-term trend indicator, the bears are clearly in control.
DWAC: Shares Continue To Sink, Volatility Turning Muted
The Bottom Line
I have a sell rating on DWAC. While upside potential is real should Trump be exonerated from the many charges facing him and if he earns the GOP nod, DWAC has not provided evidence of imminent or even possible profitable investment opportunities. With its late 10-Q filing (which has not yet been completed), there's arguably an increasing likelihood that DWAC will be delisted from the Nasdaq.
For further details see:
Checking DWAC's Pulse: More Concerning Headlines