The stock price for former President Donald Trump’s long-suffering SPAC seems to be unaffected by his prospects of winning the 2024 Presidential Election or his various legal issues.
Digital World Acquisition Corp. (DWAC) is a “special purpose acquisition company” (SPAC), a shell company established on a stock exchange to raise funds for future unidentified acquisitions or mergers. The advantages are circumventing regulatory burdens in taking a company public, while the downside is having to refund investors if the deal doesn’t close. DWAC entered into a merger agreement with Trump Media & Technology Group (TMTG) on October 20, 2021, in a deal worth north of $1 billion, only to delay the merger several times.
TMTG’s main product is Truth Social, Trump’s struggling social media company. In a November 2021 investor presentation, DWAC projected the following growth in total users (page 38):
The data doesn’t suggest that Truth Social will hit 41 million users in 2023 or 56 million in 2024. Estimates place total Truth Social users around 6.5 million, with anywhere between 500,000 and 2 million active users. Apple and Android app downloads show adoption rates are trending downward. Right now Donald Trump only has a total of 6.42 million followers on Truth Social, compared to 87.4 million in X/Twitter.
The merger between DWAC and TMTG faces three main hurdles:
1. The U.S. Securities and Exchange Commission (SEC) keeps delaying the merger. The SEC’s Division of Corporation Finance has held up the filing of DWAC’s Form S-4 registration statement submitted on May 16, 2022. This typically takes about one month, but DWAC is now on month 17. There are accusations that the SEC’s lack of action is because of political pressure. There are also DWAC’s various legal issues:
- The SEC fined DWAC $18 million for misrepresentations in filings. DWAC’s CEO “had extensive SPAC merger discussions with TMTG” before the founding and “a potential conflict of interest” that was not disclosed. SPACs aren’t allowed to be created to target a particular company.
- Three people, including one former DWAC board member, were charged with insider trading.
- The U.S. Attorney’s Office for the Southern District of New York is allegedly investigating DWAC for money laundering.
2. DWAC must keep changing the merger deadline or return investor money. DWAC’s Certificate of Incorporation gives it 12 months from the initial public offering to close any merger, with the option of extending the deadline for up to a total of six additional months. To amend the bylaws and extend the deadline for DWAC’s merger with TMTG, approval is required from 65% of all outstanding shares. If the deadline is not met or extended, then DWAC is liquidated, and funds are returned to shareholders.
3. DWAC shareholders are unfamiliar with the process. Financial institutions only own about 3% of DWAC, with the vast majority of the estimated 400,000 shareholders coming from retail investors. Anecdotally, it seems many of the retail shareholders are passionate Trump supporters unfamiliar with shareholder voting, making it difficult for DWAC to repeatedly reach the threshold needed to delay the merger while waiting on the SEC.
On top of DWAC’s issues, Trump is facing a myriad of legal issues in New York, D.C., and Florida. Despite the multiple lawsuits and prosecutions, Trump has been rising in the polls. To measure Trump’s chances of being re-elected President in 2024, we’re using PredictIt share prices.
PredictIt is a prediction market run by the Victoria University of Wellington, New Zealand, and operated by Aristotle International, for educational purposes. Traders on PredictIt can buy and sell shares on whether an event will – or will not – happen. A correct share wins $1, and an incorrect share wins nothing. For example, in the market “Who will win the 2024 US presidential election?”, PredictIt users can buy “Yes” and “No” shares on whether Donald Trump will win the 2024 Presidential Election. Share prices can indicate what traders estimate the probability of the event happening; right now Trump presidential “Yes” contracts are trading around $0.39/share, implying PredictIt traders believe he has a 39% chance of being re-elected President in 2024.
Below we’re comparing DWAC stock price and Trump Yes shares from April 21, 2022, to October 6, 2023:
There’s almost no correlation between the prices of DWAC shares and Trump Yes shares (r = -0.03).
Below are the five largest day-over-day increases in DWAC’s share price, the news likely driving the price change, the day-over-day price changes for both DWAC and Trump’s presidential contract on PredictIt:
| Date | News | DWAC Δ | PredictIt Δ |
| 4/26/2022 | DWAC reverts after Musk-Twitter deal 4/25 | +$5.09 | $0.00 |
| 4/29/2022 | Trump posts on Truth Social | +$4.33 | $0.00 |
| 7/11/2022 | Musk tries to nix Twitter deal | +$4.93 | $0.00 |
| 11/7/2022 | Trump ‘making a very big announcement’ | +$11.62 | +$0.03 |
| 7/21/2023 | DWAC settles with SEC over fraud charges | +$6.72 | $0.00 |
And here are the five largest day-over-day declines in DWAC’s share price:
| Date | News | DWAC Δ | PredictIt Δ |
| 4/25/2022 | Musk closes Twitter deal | -$5.29 | $0.00 |
| 5/9/2022 | Trump loses E. Jean Carroll lawsuit | -$4.97 | $0.00 |
| 6/13/2022 | SEC investigates DWAC & Jan 6th hearing | -$5.78 | $0.00 |
| 6/14/2022 | Judge rules Trump must testify | -$10.71 | +$0.01 |
| 11/9/2022 | Trump candidates perform poorly in midterms | -$5.53 | -$0.02 |
We see the events that drove DWAC shares up or down had almost no effect on Trump’s presidential contract share prices.
Even trading volumes are mostly distinct:
We see that DWAC is not entirely disconnected from Trump’s electoral chances: the single largest day in volume from the period of interest was November 7, 2022, and likely driven by news of Trump’s impending presidential campaign announcement.
Below are the five largest days of trading of DWAC shares in the period examined (April 21, 2022, to October 6, 2023)along with the total DWAC trading volume, that day’s DWAC volume relative to the biggest day of trading, and Trump presidential contract’s volume on PredictIt relative to their day of highest volume.
| Date | News | DWAC volume | DWAC %Max | Trump %Max |
| 7/11/2022 | Musk tries to nix Twitter deal | 10,946,900 | 33% | 3% |
| 10/13/2022 | Truth Social allowed in Google Play Store | 10,682,300 | 32% | 3% |
| 11/7/2022 | Trump ‘making a very big announcement’ | 33,331,300 | 100% | 7% |
| 11/8/2022 | Midterm elections | 23,532,600 | 71% | 16% |
| 7/21/2023 | DWAC settles with SEC over fraud charges | 31,180,000 | 94% | 4% |
None of the top five days in volume for DWAC overlapped with the top ten days of trading for Trump contracts on PredictIt’s “Who will win the 2024 US presidential election?” market. The day of the midterm elections (11/8/2022) was the closest; it had third third-highest volume for DWAC and 13th 13th-highest trade volume for Trump on PredictIt.
There obviously can be other reasons or causes for price and volume changes. And it should be noted that PredictIt’s uncertain legal status may have led to unusual patterns in trading. The single highest day of PredictIt volume in the period examined was August 4, 2022, the day the CFTC withdrew PredictIt’s no-action letter.
Yesterday, October 12, 2023, DWAC announced agreements worth $467 million had been terminated and it was in discussions to return another $533 million to investors, raising further questions about the future of the merger.
Links to more information about DWAC & TMTG:
- Official website
- SEC documents
- Stock price history
- TradingView
- Institutional investors
- “Truth Social Dataset” paper
- 10/12/2023 press release
And the various DWAC subreddits: