Digital World Acquisition Corp Stock News and Forecast: Trump social media begins launch, DWAC to spike

DWAC stock is in an ascending price channel.
TRUTH Social begins accepting users this week, hinting at a short-term spike.
Digital World Acquisition Corp's share count is expected to quadruple 30 days after the merger is completed.

Clay Webster FXStreet

Digital World Acquisition Corp (DWAC) shares are expected to spike when markets open on Tuesday after Monday's Presidents' Day holiday. Former President Donald Trump's social media startup, TRUTH Social, began allowing app downloads on the Apple Store sometime before midnight on Sunday, February 20. DWAC is merging with Trump Media & Technology Group (TMTG), the parent of TRUTH Social, sometime in March. DWAC stock is up 64% year to date.

Digital World Acquisition Corp Stock News: The killer app

Multiple media reported on Sunday that Apple's App Store began allowing downloads of the TRUTH Social app before midnight on the East Coast. Those who had previously signed up for the app received automatic downloads. Others said they were placed on a waitlist. It is expected that the app will gradually be made available to more users as the current week progresses.

The former president posted on the new beta version of Truth Social for the first time on February 15, which has been in a test phase for several weeks. Since Trump was banned from Twitter, Facebook and Youtube in the aftermath of the January 6 Capitol riot, TRUTH Social is being planned as a counterpoint to social media censorship. It joins other conservative, free-speech social media startups like Gab and Parler.

Tuesday should see plenty of price action for DWAC as the app begins posting user growth numbers and garners widespread mentions due to its backer. Existing shareholders can expect to be rewarded in the short term, though the mid-term is much more dour. Thirty days after the merger is completed, separate shares owned by insiders, underwriters and private investors who invested in the SPAC's separate PIPE deal (Private Investment in Public Equity) before the merger closed are permitted to begin trading. This means that the current 37 million or so shares available to trade will grow overnight to more than 170 million.

On top of that there are some 40 million "earnout" shares that get minted to company insiders and owners like the Trump family if the share price remains above $15, $20 or $30 a share in the month after the merger. Then there are the 15 million warrants that could get exercised in September 2022. This means that six months from now there could be 200 million total shares, which may seem like dilution to current retail investors. One short-seller thinks DWAC is primed to drop post-merger and has already issued a $36 price target.

Digital World Acquisition Corp Stock Forecast: Possible 60% spike

DWAC's coming share count expansion is not front of mind however. The SPAC is trading within an ascending price channel and is currently near the lower trend line. This is the perfect setup for a big share price jump. Now with news of the app making headlines and company no longer being "pre-product," expect a sizable spike on Tuesday.

First, DWAC stock must surpass the February 7 high of $97.15. If it does, then there is nothing stopping it from making it up to the 161.8% Fibonacci level at $134.90. Fibos have served DWAC well in the past. For instance, the February 7 high halted near the 78.6% Fibo. Gigantic spikes are what this SPAC is known for, with shares trading up to $175 after the Trump deal was first announced.

DWAC could also settle down around the $110 zone, however, where the top trend line is heading from the current price channel. Short-term support is at the 9-day moving average, currently at $83.21, and the 21-day moving average, $78.49. Longer-term support is at $38.

DWAC 1-day chart

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Author

Clay Webster

FXStreet

Clay Webster grew up in the US outside Buffalo, New York and Lancaster, Pennsylvania. He began investing after college following the 2008 financial crisis.

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