Trump Media board hijinks can’t hold back Digital World Acquisition stock
Updated
Blank-cheque firm Digital World Acquisition (DWAC) stock traded higher Friday, despite uncertainty over a shakeup on the Board of Directors at the company plans on acquiring to take public – Trump Media & Technology Group. Truth Social, the social media operations unit of Trump Media & Technology denied reports its Chairman, former US President Donald Trump, had stepped down from the board just ahead of federal subpoenas indicating an investigation was under way.
Digital World Acquisition Corp. (Nasdaq: DWAC)
Records filed 8 June with the Florida Department of State’s Division of Corporations listed Trump among those removed from the Trump Media & Technology board, along with several other executives, including Donald Trump Jr. as the DWAC merger and subsequent IPO are pending. Trump Media & Technology denied Trump’s departure from his eponymous company in a statement to Axios. The Sarasota (Fla.) Herald-Tribune was the first to report the board shakeup.
“I see Truth Social has disputed this, saying he is still on the board... But could Truth lie?” asked Mett Kennedy, a senior strategist at IPO analytics firm and ETF manager Renaissance Capital. “If it’s true that 4 directors, the COO, and the General Counsel have all departed, yeah not a great corporate governance picture to say the least.”
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Digital World Acquisition Corp. (Nasdaq: DWAC)
Trump Media & Technology disputed report
Despite the uncertainty, Digital World stock moved as high as $25.10 per share before closing at $24.52 per share, up from Thursday’s $24 closing share price. In pre-market trading DWAC traded as low as $23.61. Digital World moved sharply higher in after market trading Friday, to $26.66. Digital World stock reads on the Nasdaq exchange under the ticker DWAC.
“Contrary to an ‘exclusive’ fake news story filed by a reporter who is incapable of understanding state business records, Donald Trump remains on the board of Trump Media and Technology Group,” TMTG said in its statement to Axios. “In fact, the reporter acknowledges that Trump's title is ‘chairman,’ but apparently has no clue what a chairman presides over.”
Digital World stock has been among the most volatile on US equity markets since announcing last October its intention to take Trump Media & Technology public via SPAC merger. Immediately following the merger announcement, Digital World stock spiked at much as 1,657% to $175 per share from the $9.96 per share that SPAC stocks typically trade at. Year-to-date, Digital World stock has traded anywhere from the mid $50s to as high as $97, moving primarily on rumours and speculation revolving around the former US president.
High implied volatility
“[Digital World] has a very high [implied volatility] of just over 120%. Basically, that’s the market’s way of saying this stock could go to zero or double,” said tastyworks CEO Scott Sheridan in an email. “I suppose it’s fair to say another way of looking at it is the market doesn’t know what to make of this one and there’s a lot of uncertainty.”
The proposed merger is currently uncertain due to potential regulatory scrutiny over financial disclosures relating to the timing of the announced merger, the company stated in a Form 8-K filing with the US Securities & Exchange Commission (SEC).
“Digital World has been informed that on June 27, 2022, TMTG received a subpoena from the SEC seeking documents relating to, among other things, Digital World and other potential counterparties for a business transaction involving TMTG,” Digital World stated. “Certain current and former TMTG personnel have also recently received individual grand jury subpoenas.”
‘Running for public office’ or ‘convicted of a felony’
Digital World’s erratic stock price tends to revolve around speculation of Trump’s future plans in re-seeking the Presidency of the United States in 2024 or even facing criminal prosecution. In fact, Digital World has prepared for either scenario in its previous SEC filings.
“In order to maximize business continuity and to minimize, mitigate, or eliminate any negative impacts on the Company from a Material Disruptive Event, the Company Principal’s ownership and position in the Company shall be structured in such a way as to eliminate the need for restructuring of ownership or changes in position were a Material Disruptive Event to occur.”
Material disruption event is defined by Digital World as either Company Principal (Trump) “announces that he is running for a public office” or “is personally convicted of a felony criminal offence.”
“I don’t know if Trump leaving the company is a plus or minus in the long run,” noted tastyworks Sheridan.
“This stock has always traded more on momentum than fundamentals,” added Renaissance Capital’s Kennedy. “So maybe the only thing that matters, for now, is that Trump Media and Technology Group still has his name on it.”
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