Digital World Acquisition Corp (NASDAQ: DWAC) stock is up 50% and more this morning premarket. The action in the DWAC stock is that it’s the SPAC which Donald Trump’s “Truth” social media network will use to come to market. The app for Truth hit the Apple Store yesterday so there’s a lot more belief that both Truth will really launch and also that the merger onto the market with DWAC will.
So, an increase in value seems fair enough. Of course, there’s all the detail of exactly how many shares of what will be handed over, Even, whether the SPAC shareholders might withdraw their cash. But with the cash price in at $10 and the DWAC stock roaring through $100 as we speak there are likely to be few withdrawing from the deal.
In terms of predicting where the DWAC stock price is going to go from here that’s simply too bound up in emotion – and political emotion at that – to be definable.
In objective terms, there’s no particular reason why the idea shouldn’t work and many why it should. The code to create a social media app exists already and is easily enough deployable. There are public domain versions of perfectly workable and usable things for free on GitHub for example. Server space is not an issue as long as someone checks for it and so on.
The big ask, the grand need, for a social network is some reason for folk to go there. The entire field depends upon network effects. The more people there are on there then the more attractive it is for the next person to add themselves. This is a field where success really does breed success. Whether Trump’s claims of whatever are true doesn’t in fact matter, only that tens of millions believe they are. At which point there’s the core user base.
So, logically, this new social media network, “Truth” could in fact work.
There are also all those reasons why it might not. That MAGA user base might not be all that loyal to the new network. It’ll certainly come under sustained hacker attacks. There’s also been that wonder whether the grubby details of actually making it work will be properly attended to.
But as the launch of the Truth network comes closer then some of those uncertainties fall away. Thus the value of the merger SPAC, DWAC, rises. The idea that it’s risen 50% (now 34%, given the time taken to type this) because the app is now in the Apple Store might be a bit excessive. But then that’s how the DWAC stock price is going to go.
We’re not dealing with an objective view of the prospects for the Truth social media network here. This is too bound up with social and political emotion for that. Which means that trading the DWAC stock requires reading those waves of emotion. This is going to be a roller coaster ride for some time now.
We do then have one more political question of course. Assume success – just how rich is this all going to make Trump? Being kicked off Twitter might have been his most successful business move yet.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.