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Why Shares of Digital World Acquisition Corp Rose Today

What happened

Shares of the blank check company Digital World Acquisition Corp (NASDAQ: DWAC) rose 14% today for no apparent reason. However, the stock continued its nice run from last week after reports revealed that the Donald Trump-backed social media platform, TRUTH Social, which the company is merging with, plans to launch in February.

So what

As a special purpose acquisition company (SPAC), Digital World Acquisition Corp went public with the intent of acquiring a private business to bring it public. In late October, the SPAC announced that it intended to merge with and take public Trump Media & Technology Group, the parent of TRUTH Social.

Image source: Getty Images.

TRUTH Social is a self-proclaimed "social media platform that encourages an open, free, and honest global conversation without discriminating against political ideology." The platform is expected to be very popular among Trump supporters, many of whom believe they are being censored on more mainstream social networks like Twitter.

Following the merger announcement, shares of Digital World Acquisition Corp exploded all the way to more than $94 per share. Since then shares have fallen some on news that the deal is being investigated by the Securities and Exchange Commission (SEC). However, shares began to lift off again last week on reports that the platform will formally launch on Feb. 21. Today looks to be a continuation of that move.

Now what

A Trump-backed social media platform is definitely capable of building a big following, but the stock seems like it has run up way too quickly.

The market cap has now reached $2.35 billion, the platform has not yet launched, and there are still pending regulatory issues, so I would be wary of the stock right now. There are plenty of uncertainties, and there could be plenty of volatility ahead.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool owns and recommends Twitter. The Motley Fool has a disclosure policy.


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