Truth Social’s parent will be a publicly-traded company as early as next week, after investors in Digital World Acquisition authorized the merger of that special purpose acquisition company (SPAC) with Trump Media & Technology Group, which owns Truth Social, in a deal that could net Donald Trump over $3 billion. And that could set off a meme stock explosion that Wall Street hasn’t seen since GameStop.
This time around, though, it’s not Reddit’s WallStreetBets crowd that’s pouring money into the stock, it’s the MAGA movement.
Shares of Digital World are up roughly 140% year to date (though the stock was down more than 12% at one point today following the merger). That’s in large part due to retail investors who have been buying the company in anticipation of the merger with Truth Social’s parent company. And comments on a forum on Truth Social show that a big part of the motivation was their loyalty to Trump.
“Bottom line is we now have the greatest promoter of all time who will soon be promoting DJT during the most contentious election cycle in history,” wrote one user.
“DWAC was the first stock I personally ever bought! So thankful being a part of journey!” wrote another.
Truth users/investors approached the IPO in different ways. Some took to the site to pray. Others fell back on some familiar memes that are favorites of the crypto bros. One user wrote “The hit pieces are already coming. LOL I’m buying more and hodling!” Another urged fellow investors to, “HOLD THE LINE.” And, naturally, the image of Mel Gibson from Braveheart in war paint shouting “Hold!” has popped up a number of times.
Ironically, over at Reddit’s WallStreetBets forum, which led the charge on the runup of GameStop and AMC shares, traders appeared largely skeptical of Truth’s debut on Wall Street.
“This shit is worthless,” wrote one Redditor. “It will free fall eventually whether Trump dumps shares or not. You can play the hype around it for sure, but no idea how anyone could see any real value in this dumpster fire.”
DWAC has already seen the meme stock surge. In 2021, it saw share prices soar as high as $100 apiece, with a market cap of $10 billion. Today, the company’s market cap is just over $1.5 billion—and the stock could see further volatility. Trump Media lost $49 million in the first nine months of last year, when it brought in just $3.4 million in revenue.
Some Redditors wondered if the company’s board would offer Trump an exemption to his six-month lockup period, allowing him to sell some of his shares (currently valued at about $3 billion) as early as Monday to help pay his $464 million bond. Doing so, however, could put the board in the crosshairs of upset investors. It would need to be able to demonstrate that waiving the lock-up agreement was done to benefit shareholders.
There’s also the matter of the Securities and Exchange Commission (SEC), which has kept a close eye on this deal since the beginning, delaying the merger several times as it sought additional paperwork and information about the deal. Any Trump exemption could raise eyebrows with regulators as well.
Trump’s deal with DWAC gives him virtually unlimited power at the company. A previous filing noted that no personal or political conduct could be considered terms of a breach of the agreement, even if it was “dishonest, illegal, immoral, or unethical.” Trump will also have the power to elect who sits on the board of directors and can potentially block matters that would normally require stockholder approval. He can also single-handedly decide whether to accept or reject a buyout, regardless of shareholder sentiment.
“President Trump has the ability to significantly influence and may, depending on the level of redemptions, control the outcome of all matters requiring stockholder approval, including the election and removal of the Combined Entity’s entire board of directors and any merger, consolidation, or sale of all or substantially all of the Combined Entity’s assets,” the company said in a 2022 SEC filing.
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