Digital World Acquisition Corp. (NASDAQ:DWAC) stock a special purpose acquisition company (SPAC ) that announced a merger with former President Trump’s media firm Trump Media & Technology Group (TMTG). It has soared from nearly $10 in Oct. 2021 to $83.73 as of the close of Feb. 18, 2022.
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If you think this is irrational, then consider that DWAC stock has a 52-week range of $9.84 – $175.00. At one time investors who had bought shares near $10 could have sold them at 17.5 times higher turning an investment of $100,000 to $1.75 million, enough to retire at some exotic destination.
I called DWAC stock as a nominee for the drama award if there was one but apparently, history has not agreed with me until today. Shares of Digital World Acquisition Corp. have rallied. What is the story now behind Trump Media & Technology Group?
DWAC Technical Analysis
The technical analysis of DWAC stock to me that I start primarily with fundamentals reveals two things. First trying to discover and time the ultimate top of a stock price is as dangerous as trying to time the ultimate bottom. A double top, triple top, overbought indicators, and other interesting stuff support the idea that DWAC stock is overbought and prone to a correction, still it defies gravity and resists and moves higher.
Second, no news is good news. Stocks move on to the release of material news, and now the stock market is waiting for updated material news. This will be translated into the chart of the stock.
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Third, overbought stocks can continue to trend higher for a considerable amount of time until a dramatic shift occurs. Think of stay-at-home stocks as a prime example. They finally crashed most of them, if not all, but kept moving to higher levels for so long transferring wealth from the impatient investors and traders who sorted them to the irrational ones who kept them as long as the rally was under fire.
If you are wondering what will move lot the DWAC stock, that will switch to Trump Media & Technology Group soon then a hint is smart money. Institutional investors will either gradually or suddenly liquidate shares and leave retail investors wondering what hit them if, of course, they are at the buy-side.
The Big Idea Behind TMTG Is Freedom of Expression
Trump Media & Technology Group states it will offer no political discrimination and it will be standing up to Big Tech, fighting censoring content. Being born in the country that gave birth to democracy and the Olympics I like that a lot.
I also love capitalism that Trump Media & Technology will defend along with protecting democracy.
Monopoly is the worst ever form of business for consumers. It leads to high prices with no other alternative products. Why tech monopoly should be a good idea? After all, Twitter (NYSE:TWTR) and Meta Platforms (NASDAQ:FB) has banned former President Trump from posting content.
I also find it funny that in its presentation, Trump Media & Technology Group mentioned that Twitter maintained the Taliban account while banning U.S. President. Is there a business opportunity now for Trump Media & Technology Group to disrupt the FAANG monopoly in social media?
The bullish case is built on Trump’s massive social media followers and the ideology of presentation Trump Media & Technology Group that welcomes a liberal, independent, and conservative audience. A “big tent” philosophy for open free discussions.
Trump Media & Technology Group estimates that in the year 2026 it will generate $3.6 billion of revenue. That is a big leap from the estimated revenue of only $1 million in 2022.
The Bottom Line
An interesting article on CNN mentions a series of risks, legal and financial for Trump. Their development is critical as it should directly impact shares of TMTG.
From a valuation perspective, it is too hard to justify the stock price and the market capitalization. There could be stock dilution soon and now the fundamentals are non-existent, only projections exist by TMTG.
To be safe now it is best to avoid the DWAC stock. Yes, it is flirting with bubble territory, but it remains highly volatile. Let the smart money decide its path. We know the logical outcome, we do not know the timing though.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Stavros Georgiadis is a CFA charter holder, an Equity Research Analyst, and an Economist. He focuses on U.S. stocks and has his own stock market blog at thestockmarketontheinternet.com/. He has written in the past various articles for other publications and can be reached on Twitter and on LinkedIn.
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