Trump-Linked SPAC Takes a Nosedive as Short-Sellers Emerge
Digital World Acquisition Corp (DWAC) took a detour from its recent rally. The blank check company that is poised to combine with Donald Trump’s new media empire plummeted more than 10% today to below $84. The declines were triggered by a short positioned initiated by Iceberg Research. Adding insult to injury, the sell-off comes on the heels of last week’s rally in which DWAC soared close to 850% .
Iceberg Research revealed its short position in DWAC on Twitter, saying that the “initial excitement has passed” and that there are only “risks” ahead for the foreseeable future. The firm also expects that Trump will probably “keep more of the merged company for him” in the renegotiation, a theory they are basing on the current price.
We are short $DWAC. Now that initial excitement has passed, we see only risks for investors in near future. Based on Trump's track record, at current price, renegotiation is likely to keep more of the merged company for him.
— Iceberg Research (@IcebergResear) October 25, 2021
Iceberg Research didn’t want to venture a guess on the potential success of Trump’s new media company, Trump Media & Technology Group (TMTG). They were just quick to point out that as of yet, “SPAC holders don’t own a piece of this project,” adding that Trump holds the upper hand.
DWAC shares didn’t stay down long and are climbing nearly 4% higher in the after-hours market to $87. The SPAC started trading in late September at $10.
Social Media Gambit
Trump’s new social media platform, which he calls TRUTH Social, hasn’t even launched yet. The SPAC with which it plans to merge has been on a bull run, the latest short interest notwithstanding.
Trump is stepping into the social media arena at a time when Big Tech companies including Facebook are under a microscope. Nonetheless, based on Facebook’s latest quarterly results and a rising stock price, the social media behemoth is resilient.
TRUTH Social Under Fire
TRUTH Social is expected to make its debut in early 2022, but the company is already facing hurdles. TMTG is accused of using the open-source code of Mastodon, a decentralized social network, for TRUTH Social and allegedly violating the terms of that software.
Another Twitter alternative called Gab is an implementation of the Mastodon code, according to reports, in which case TMTG would not be the only platform using it. The issue at hand for TMTG is that it allegedly refers to the code as “proprietary” without acknowledging Mastodon. TMTG has 30 days to act.