Digital World, the Newest Meme Stock of 2021

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Since its IPO on Wednesday, Oct. 20, at $10 a share, Digital World Acquisition Corp. (DWAC) has seen a meteoric rise in value and popularity. This past week, it was one of the most traded stocks on the New York Stock Exchange (NYSE). It had a volume of more than 90 million and soared to $175 a share, well over a 1000% increase in a single day. 

All this leads to the question: How is an obscure media company with a market cap of only $2 billion one of the hottest new stocks on Wall Street?

DWAC announced its new Special Purpose Acquisition Company deal, or what is constantly read in the Journal as a SPAC, with Trump Media & Technology Group (TMTG). This is major news across the board, both in business and culture. This year alone, there have been over 470 SPAC IPOs, twice as many in 2020, becoming the most ever in market history. 

A SPAC raises capital through a merger with a smaller company that still intends to go public. This has become the new standard for entering the market at half the stress level and time of traditionally funding and launching one’s own Initial Public Offering. Companies opt for SPAC IPOs so they do not have to launch their own series of funding which require a lot of out-sourcing, not to mention, much more legal work and time. 

DWAC, in a SPAC deal merging with Trump Media, will finance its upcoming chapters, as they plan to launch Truth Social, social networking media platform led by Donald Trump and will be available in 2022 on the App Store and Google Play Store.

SPACs have become the new standard of going public, especially in the tech sector. The only concern with this trend of increasing SPACs, there is a lack of supervision than with typical IPOs because the parent company is solely responsible for all quarterly earnings, annual numbers and legal work.  

So, for example, Trump Media does not have to report their quarterly earnings because they will be grouped into Digital World's finances. There’s nothing wrong about this per say, but this idea that a smaller company can have the option to go public without the stress of reporting public performance is a no brainer. Therefore, all the stress and expectations are then handed over to the parent company leading the SPAC deal and will revert tactics for marketing, expanding, etc. 

The most obvious story of Digital World’s success is the continued popularity and cultural commitment to businessman and former President Donald Trump. Prominent figures can have such a significant effect on a company’s stock today. We’ve seen it several times over with Elon Musk’s influence on cryptocoins with his tweets. 

To know that several everyday traders in America and abroad bought DWAC stock because it was linked to Trump’s name is intriguing. DWAC stock continues to punch well above its actual market value, showing the freedom of the market and the effect a large group of non-typical investors can have on a stock. 

Earlier in the pandemic and even at the start of 2021, we saw a common trend in rises in “meme stocks” with GameStop, AMC and Blackberry. While it was interpreted by many corporate executives and government figures as market manipulation, it also showed the freedom of the stock market and the possibility to pump and dump stocks with no repercussions. Keep in mind, trading AMC or GameStop stocks as they rose earlier in the year was not illegal, just frowned upon by the people who didn’t benefit from the exuberant returns.

Is DWAC a meme stock? Yes. It is arguably one of the most volatile stocks on the market with its constant changes and high volume. Not to mention, since the market determined its Initial Public Offering was worth $10 a share, DWAC stock has seen a meteoric high of $175 a share and this week, it continues to vary from $55 to $70 a share. 

Now, two weeks since its IPO, DWAC has cooled down but still remains a highly traded stock with an average volume of eight million. Many traders and DWAC holders continue to keep faith in the stock and “ride it out” with their initial stock purchases at a much lower IPO price of $10 a share, as their portfolios still sit with more than generous returns. 

We are living in an age where the everyday investor has power in the market. Twenty-five years ago you couldn’t access your portfolio unless through a world of mediums. You needed a broker who took what would now be seen as an egregious fee, and you had to entrust them with your phone-initiated purchase of a stock. 

It is near impossible to gauge DWAC’s success and because the stock is so volatile, it leaves an opportunity for investors like in the GameStop scenario, to either make or lose a lot of money.