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Why Is Digital World (DWAC) Stock in the Spotlight Today?

Investor Place · 04/29/2022 10:50

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

Digital World Acquisition Corp. (NASDAQ:DWAC) is back in the green after former President Donald Trump remembered to use it. After two months of radio silence, Trump finally posted on Truth Social. This news delighted the users who still check the app, leading to a flurry of activity as popular far-right commentators expressed their support. While DWAC stock is still rising today, this news raises plenty of questions about the future of the platform.

A hand hovers over a phone screen with the Truth Social social media logo
Source: rafapress / Shutterstock

What’s Happening With DWAC Stock

In keeping with its performance for most of the week, DWAC has been turbulent today. It began the day by falling 5% but has since rebounded. The stock briefly rose to 9% for the morning but has since dipped and is currently up 8%. All this happened within the first hour of trading, so there is plenty of time for things to change. Much will depend on if Trump continues using Truth Social and how he utilizes the platform.

Why It Matters

Trump’s post yesterday was short and direct. It featured a photo of himself on the lawn of his Mar-a-Lago resort with only the words “I’M BACK!” and the hashtag “#COVFEFE.” This nonsensical term is likely a reference to a tweet he posted in 2017 containing the same phrase.

The post has received significant engagement and “re-truths,” the platform’s version of retweeting. Of course, this is hardly surprising. For all the conservative influencers the platform hosts, only Trump has the power to affect the company. For the weeks he was not posting, download statistics fell as quickly as DWAC stock. This wasn’t because popular far-right voices weren’t using the app, but the general user base revealed it was only there for Trump.

Now that he’s announced that he’s back, the future of DWAC stock hangs in the balance. Trump seems determined to make the platform he founded a viable enterprise, but he is still battling a tremendous adversary. With Elon Musk poised to take the reins of Twitter (NYSE:TWTR) and revamp the social media giant’s free speech policies, conservative users will be tempted to return to the much more popular platform. While Trump has 2 million followers on Truth Social, that is still a tiny fraction of the 90 million+ he had on Twitter before being forced off the platform.

Those numbers indicate that Truth Social doesn’t have a large enough user base to overtake Twitter. With that in mind, the question remains: can it hold its own against a giant of industry? It doesn’t seem likely, given that Musk’s broad appeal will likely lure some of Truth Social’s users back to Twitter, compromising its market share even further.

What It Means for DWAC Stock

The best case scenario for DWAC stock investors would be for Trump to make a regular habit of posting on Truth Social. However, even that wouldn’t be enough to save the stock. While he has said he won’t be returning to Twitter, that doesn’t seem likely. The social media giant is about to see an influx of conservative users, which will be very tempting for the former president. Some members of his inner circle have already expressed doubt that he’ll be able to stay off it.

None of this bodes well for DWAC stock. Despite this week’s winning streak, the bearish case against it still holds. Even the return of Trump won’t help it compete with Twitter under Musk. The stock is still a name to avoid, and that won’t change as buzz surrounding Twitter heats up.

On the date of publication, Samuel O’Brient 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.

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