Trump-linked SPAC profits have investors jumping on the Presidential bid
(Bloomberg) — Investors snapped up shares of Digital World Acquisition Corp., a white-check venture to merge with Donald Trump’s social media company, after the former president revealed plans to make another bid for the White House.
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The special-purpose buyout company rallied 66% since the merger was announced, with millions of shares changing hands, the biggest one-day advance. Warrants linked to the SPAC rose 125% to $9.30, while Phunware Inc., a software company that worked on Trump’s election campaign, jumped 38% and Rumble Inc. the video platform increased by 3.8%. Rumble says it’s “designed to be immune to cultural cancellation” and has a deal with Trump Media & Technology Group.
Digital World’s rally accelerated as the session wore on, with more than 32 million shares changing hands, nearly 33 times the average activity over the past month. Call option volume outnumbered stock sales by a 2:1 ratio, with calls with a strike price of $30 expiring on November 11 and the most traded on November 18.
The gains from Trump-linked companies came after he repeated his boast that he is leading the polls for the GOP nomination. Trump tentatively plans to announce his 2024 campaign in the week after the U.S. midterm elections, people familiar with the matter told Bloomberg.
The digital world has been volatile as SPAC backers have not been able to vote on an extension of the deadline for their predominantly retail merchant base to merge with Trump Media & Technology Group. Shares were down 70% from a year ago through Friday’s close, amid weak demand for Truth Social and as investors weigh how Elon Musk’s acquisition of Twitter Inc. could affect its future.
The stock has been a favorite among the retail crowd since the tie-up was announced last year. While acquisitions have slowed, they have pushed SPACs to become the best performers of their kind. With Monday’s bump, $10.20 holders are selling more than the 185% premium they would get if the deal collapses.
“Any Trump news is going to increase interest,” said Matthew Tuttle, CEO of Tuttle Capital Management. “If Trump becomes president again that could be good for DWAC, at least in the short term. In the longer term, if his enemies are out to get him, you have to think that something related to DWAC might be low-hanging fruit.
Retailers were actively discussing the digital world on Monday. Its ticker trended on Stocktwits and was among the companies mentioned on Reddit’s WallStreetBets forum, competing with mentions of favorite retailer Tesla Inc. Despite the trades, trading was subdued among Fidelity clients, who were almost outnumbered by sellers of buy orders.
Short covering can also drive some strength, an act in which investors close out some negative bets as stocks rise. Almost 13% of Digital World shares available for trading are currently sold short, according to data from S3 Partners.
(Updates share movement throughout.)
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