However, if and when the ball gets rolling, I would expect TRUTH to grow fast. So far, we have not seen substantial progress from the operations side, which makes me cautious about investing in DWAC. However, the company has a lot of hurdles ahead, including finding young talent. I personally welcome competition in the highly monopolized market of social media platforms. Trump's social media platform, TRUTH, certainly has potential.
I think this SPAC might offer a better risk-reward while simultaneously quenching your thirst for outsized returns. Rumble aims to be a competitor to YouTube and has seen significant user growth in the last year. For example, Rumble SPAC CFVI ( CFVI) is up considerably in the last few days following news that it would take Rumble public, and that Trump Media would be using Rumble as a distribution partner. So far, Trump Media has failed to deliver on its promises, and investors have very little guidance to hold on to.īut, if against sound judgment you wish to ride this meme train, I would suggest hopping on some of the other Trump-associated SPACs. To gain real momentum, I would like to see some more relevant news coming from the operational side. Having said this, I believe this is too speculative a move, and I would expect it to end up dying down quickly. The potential is certainly there, with the eye-grabbing headline of "$1 billion in funding" renewing interest in the SPAC. Does the stock have the potential for another meme run? Certainly, we are seeing some interesting action and pick up in volume in the pre-market. Should you buy DWAC for meme potential?Īt this point, speculative investors might be wondering if now might be a good time to jump into DWAC. On the other hand, PIPE investors would likely be insulated from this outcome. There is still a possibility DWAC won't be able to take TMTG public, and if so, regular investors will be left high and dry. As I mentioned in my last article on the matter, DWAC got off to a rocky start, including a potential SEC violation. There is still a lot of uncertainty surrounding the company and DWAC. Furthermore, it begs the question of why TMTG had to resort to this form of funding. The private investors are getting discounted shares, which might make some reconsider their investment in DWAC. Having said this, the PIPE deal is ultimately dilutive to "regular" shareholders.
Despite this, the company has secured plenty of funding, and as I write this DWAC is up pre-market by over 6%. TRUTH Social has little to show in terms of achievements as of now, and the company even missed its deadline to launch a private beta in November. Of course, by then the company had an established platform with close to one billion users. When Facebook IPO'd in 2012, its yearly operating costs were just under $1 billion per year. This is certainly a step in the right direction, but will it be enough? It's hard to say at this point, since we don't know the scope of the company's ambitions, but we could make a comparison with Meta Platforms Inc ( FB). Together with the money from Digital World Acquisition Corporation ( DWAC), TGMT now has $1.25 billion in cash available to launch its social media app TRUTH, with the company being valued at $3 billion. Much like with regular stock dilutions, a case can be made for both a bullish and bearish thesis. The question now is what can we expect from the company, operationally, and the stock, in terms of price movement. Looking at the specifics of this deal, it appears that private investors will be receiving a 20% discount to the volume-weighted average closing price for the five trading days before and including Dec 1st. For this reason, stocks that have completed a PIPE deal are sometimes targeted by short sellers. In some cases, clauses could protect PIPE investors from further downside, promising more shares if the price drops below a certain point. On the flip side, this relies on selling discounted shares, which dilutes existing investors. PIPEs are a good way of securing funding quickly and they involve much less regulatory scrutiny, which we can speculate is the reason Trump Media has chosen this method.
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