What happened
Despite sell-offs roiling the broader market, the stock of Digital World Acquisition (DWAC +0.00%) is rocketing higher today. The company's shares were up roughly 15.5% at 11:45 a.m. ET Tuesday.
There doesn't appear to be any fresh news powering the gains, but excitement surrounding the stock is surging ahead of the company's merger with Trump Media & Technology Group and the launch of their social media platform, Truth Social. It's a social media service backed by Donald Trump that's on track to launch Feb. 21, and investors are pouring into Digital World Acquisition stock ahead of the debut.
Image source: Getty Images.
So what
The pre-order page for Truth Social on Apple's App Store was updated on Jan. 6 to include an estimated launch of Feb. 21, coinciding with Presidents Day weekend. Digital World Acquisition's share price has been on a strong upswing ever since the news broke.
DWAC data by YCharts.
While mounting anticipation for the Truth Social launch appears to be the main driver behind Tuesday's gains, it's also possible that the special purpose acquisition company (SPAC) stock is getting an extra boost from a rally that Trump held in Florence, Arizona, on Jan. 16.
Now what
Investors should move forward with the understanding that Truth Social is still roughly a month from launch, and it's likely that the platform has not yet generated any significant revenue. That makes valuing the combination of Digital World Acquisition and Trump Media & Technology Group a difficult task.
Truth Social looks like it will be very similar to Twitter and has been built on the open-source Mastodon platform. It's possible that the upcoming Trump-backed social media platform will be able to attract a sizable active user base and generate sales from advertising, in-app purchases, and other channels. But it's not the only player positioning itself as an alternative to Twitter, Meta Platforms' Facebook, and other networks.
With a market cap of roughly $3 billion, Digital World Acquisition could have more explosive upside. It's a high-risk investment and will likely continue to see volatile trading in the near term.
