Shares in Digital World Acquisition Corporation (NASDAQ: DWAC) were up even as its merger with one of former President Trump's ventures faces an investigation by regulators.
The deal with Trump Media & Technology Group (TMTG) faces scrutiny from the Securities and Exchange Commission (SEC). The regulator is understood to have asked Digital World Acquisition for information about stock trading and its communications with TMTG prior to the announcement of a merger that the duo agreed to in October.
DWAC has said it is cooperating with the regulator's inquiries, which commenced in late October.
Digital World Acquisition Corporation is a SPAC, with the merger set to make TMTG a publicly listed entity on the NASDAQ exchange.
Is DWAC a meme stock?
The deal is attracting a lot of attention, with Trump's popularity among some investors having turned DWAC into something of a meme stock. Indeed, trending tracker Ape Wisdom had DWAC as one of the top 10 trending stocks on Reddit on Tuesday
Surprisingly, the news has actually led to DWAC's share price climbing, with the stock up by over 10%. Indeed, the SPAC's share price has increased by 382% since its IPO in late September, though it currently sits at around half of the $98 value it hit in late October.
This spike came just after confirmation of the merger plans with TMTG.
Even so, it appears that the share price is not actually being dictated by the company's financials or prospects.
What is Trump Media & Technology Group?
TMTG has not been far from the news cycle recently. Just last week, the company said it had entered into agreements to raise $1bn from investors ahead of its planned stock market listing.
The company has ambitious plans to compete with social media big dogs Twitter (NYSE: TWTR) and Facebook with its own TRUTH Social platform.
Filings with the SEC claim the venture will be a "rival to the liberal media consortium and fight back against the 'Big Tech' companies of Silicon Valley".
DWAC has said that it thinks the project could attract as many as 40 million subscribers and 81 million total users by 2026.
It is perhaps unsurprising that Trump wants to steal attention away from these social media giants, as Facebook, Twitter, YouTube and more besides banned him from their platforms for his comments around the time of the storming of the US Capitol Building in January 2021.
The former President certainly has a loyal following, but whether the launch of a Trump-endorsed platform will be enough to make a major dent in Twitter and Facebook's user base or even compete with them is uncertain.
Similar attempts by right-wing platforms, such as Parler, to draw users away from established social media giants have failed to make much of an impact.
Indeed, while downloads of the app reached an impressive 517,000 in December 2020, they had fallen to a paltry 11,000 in June, as interest in the platform waned.
Other right-wing social media competitors TRUTH Social would go up against include Gab and Gettr, which was launched in July by former Trump aide Jason Miller.
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