Digital World Acquisition Corp. (DWAC) shares rose after early losses on Tuesday as the private equity firm’s shareholders approved a one-year extension to the disclosure deadline for former President Donald Trump’s social media platform.
During a shareholder meeting held on Tuesday at 12 p.m., DWAC informed investors that more than the 65% needed to approve the matter had voted in favor of extending the deadline.
The decision by investors to approve the extension comes after Trump announced he is running for president in 2024.
DWAC shares rose 9% on Tuesday after falling 1.3% earlier market trade. Stocks pared losses on Monday, rising at the close after Elon Musk reinstated Trump’s Twitter account on Sunday.
DWAC Shareholders Meeting
In early November, DWAC’s stock rallied after the SPAC delayed the shareholder vote — for the sixth time — whether to approve a one-year extension to complete its merger with Trump Media and Technology Group. Trump Media is the parent of the conservative social media platform Truth Social.
The shareholder meeting was postponed until Tuesday, November 22, where the SPAC finally announced that shareholders had voted in favor of extending the deadline to September 8, 2023.
DWAC’s deadline to complete its merger with Trump’s company was originally set for early September 2022. However, the SPAC said the Securities and Exchange Commission’s investigation into the deal has delayed the process.
Because DWAC shareholders failed to complete a vote in September, the SPAC’s sponsor, ARC Global Investments, contributed about $2.9 million to extend the merger deadline to Dec. 8, according to federal filings.
DWAC warned investors that if the one-year extension is not granted, the company could potentially cease operations and liquidate shares.
In an SEC filing, DWAC disclosed that from Sept. 19 to Sept. 23, it received termination notices from private investors in public equity (PIPEs) totaling about $139 million. In its Aug. 23 quarterly report, it reported a loss of $6.2 million in the first half of the year. And according to its latest filing, it continues to lose millions of dollars.
DWAC shares and the Trump brand
DWAC is a special purpose acquisition company that is trying to take the former president’s technology and social media platform public through the reverse merger that was popular a few years ago. The company said last week that it was continuing to pour cash. The SPAC said it lost roughly $3.4 million in the most recent quarter ending Sept. 30, according to SEC filings. The group confirmed on Tuesday that it has lost more than $10 million so far in 2022, according to federal filings.
DWAC’s future and its efforts to take Trump Media and Technology Group public are closely tied to the value of the Trump brand. Another presidential run is seen as a big boost for the brand.
Shares of DWAC fell last week after Trump officially announced that he would again seek the Republican nomination as the presidential candidate in 2024. That was a reversal after DWAC shares had soared about 70% in early November following the news that Trump’s presidential bid was imminent. Currently, DWAC shares are up about 50% in November.
DWAC shares also fell after the midterm elections, as Republicans fell short of expectations. The performance was read by some as a rejection of Trump-backed candidates. Given the doubts raised by the midterm results, another run for president is the clearest short-term path to bolstering Trump’s brand appeal.
The Musk and Trump Affair
on friday night Tesla (TSLA) CEO Elon Musk, who took over Twitter on October 28, posted a poll from his account asking members of the public to weigh in on whether Trump’s account should be reinstated. Twenty-four hours later, Musk tweeted that “the people have spoken. Trump will be reinstated.”
The Twitter poll appeared to have more than 15 million responses with 51.8% of the vote in favor of Trump returning to Twitter.
Trump, however, said he would not return to Twitter.
“I don’t see a reason for that, they have a lot of problems on Twitter, you see what’s going on. It may succeed, it may not succeed,” Trump said during the Republican Jewish Coalition’s annual leadership meeting on Saturday.
Trump also signaled on Truth Social that he would stick to his social media platform and not start monetizing tweets.
“Vote positive now, but don’t worry, we’re not going anywhere. Truth Social is special!” Trump wrote on Saturday, referring to Musk’s Twitter poll.
Musk appeared to respond on Twitter on Sunday, posting an imagination depicting a woman representing Twitter and a priest representing Trump.
“And lead us not into temptation,” the billionaire wrote.
DWAC action with Musk at the helm of Twitter
The recent volatility in DWAC stock comes after Musk took over Twitter, changing the way the social media platform is run.
Musk has cut roughly half of the staff at the social media site, while frequently tweeting about his plans and politics. Musk has also personally responded to customer complaints and suggestions. There is widespread confusion about the launch of verification features and there is speculation that the company may go bankrupt.
On Friday, Musk tweeted, “Twitter’s new policy is free speech, but not free access.”
Musk said that “negative/hateful tweets” will be demonetized and that other users won’t be able to find the tweet unless they specifically search for it. Musk added that this only applies to tweets, not accounts.
Musk’s focus on Twitter hurts Tesla stock, according to some analysts. Tesla shares are up about 20% since Musk took over Twitter on Oct. 28. Tesla shares rose 0.6% on Tuesday after falling 6.8% on Monday.
Musk too sold 19.5 million Tesla shares for $3.95 billion on November 4, 7 and 8. The decision to sell some of his Tesla stock came just days after Musk finalized his $44 billion purchase of Twitter.
Last week, Musk testified in a Delaware court to defend himself in a shareholder lawsuit.
While testifying, Musk said he expected to “reduce my time on Twitter and find someone else to run Twitter over time,” according to news reports.
DWAC shares hit highs
Truth Social was launched after Twitter shut down Trump’s account following the January 6 riot at the US Capitol. Some industry observers argue that a return to Twitter could shift much of Truth Social’s audience to the more mainstream channel.
DWAC shares are down about 87% from their Oct. 22, 2021 high of 175, hit just after news of the Trump merger deal.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
Futures: Nvidia, Cisco are earnings drivers; The recession signal is getting stronger
Top funds buy into #1 industry leader near breakout with 364% growth
Trade with experts on IBD Live
Get an edge in the stock market with IBD Digital
Exxon, Chevron investors ignore Biden
Seven rules for investing in a tough market