If you were lucky enough to keep your SPAC (Special Purpose Acquisition Corp) monitor intact through the last 6 months, it’s possible you are surfing another wave of buying in these investment vehicles meant to bring privately operating companies, some established and some in the development stage, public through acquisition. This has become a popular mode of listing, especially if funds available to these companies are tight and they want to get to an exchange quickly. Equally as popular is investor interest is these SPACs and associated warrants.
The Digital World Acquisition Corp. (NASDAQ:DWAC) SPAC, only around since the beginning of October 2021, made headlines in a big way when it announced that it was bringing Donald Trump’s new venture, Truth Social, public through a transaction that valued the company at $875 million. Traders propped the price of the stock to parabolic heights on Friday as it peaked at $175 in mid-day trading, settling at $94, or a $3 billion market capitalization, over 3 times the transaction’s value.
The associated warrants, Digital World Acquisition Corp. (NASDAQ:DWAC), had a run from $0.50 on Wednesday to $79 at its peak on October 22, 2021, or a percent gain of 15,700%.
The aim of the new platform is to compete against the incumbent big tech ecosystem across the board. At the top of the list of offerings is a new social media platform called Truth Social, which has the two-fold goal of challenging big tech competitors while building a platform with the stated purpose of providing an outlet for free speech, a point of contention across party lines.
The app, which will begin a beta launch for invited guests starting in November 2021, will make its full debut in the first quarter of 2022. It’s part of the newly established Trump Media and Technology Group (TMTG) which Trump founded as part of his contribution to the growing phenomenon known as tech lash, which involves a trend to take on big tech oligarchies, such as Facebook, Inc. (NASDAQ:FB), $TWTR and Alphabet Inc. (NASDAQ:GOOG)
The platform appears to be shaping up to look like this:
There are three main components to the newly formed Trump Media and Technology Group. Truth Social is slated to be a direct competitor of Facebook and Twitter. In addition to that, there will be two outlets: TMTG+ will compete with companies like Netflix, Inc. (NASDAQ:NFLX), Walt Disney Company (the) (NYSE:DIS) Plus, and then TMTG News, to compete with CNN and iheartmedia, Inc. (NASDAQ:IHRT).
Finally, as seen above, there’s a long term “tech stack” opportunity that will take on Amazon.com, Inc. (NASDAQ:AMZN) Web Services, Google Cloud and similar enterprises. All in all, it is a multi billion dollar challenge to big tech.
So, why is this important? If you are into SPACs, It illustrates the need to track those that are in hot industries, and especially if the capital structures of the non-operating companies are favorable. In the event a deal is inked, low outstanding share counts and floats could send shares soaring. Even when you don’t know the industry that a shell corporation is looking to enter, keeping the list of SPACs near and dear could lend to an historic day of portfolio gains as it did for so many this past week. This means, setting alerts, reading filings, watching price action, and staying ahead of trends…and most importantly, not getting lazy in your SPAC research when the sector is out of favor, as it had been for several months.
Large investment firms like Saba Capital Management hold 100’s of SPACs in their portfolios, no doubt hoping to catch lightning in a bottle. Saba certainly did this time with DWAC, as did our friend, @hkuppy, founder of adventuresincapitalism.com, who also tracks event-driven strategies at http://KEDM.COM. (Check out the Important Tweets section below).
SPACs have been hitting our new highs screens internally, and we know that it’s only a matter before another opportunity like DWAC/DWACW presents itself. As you know, most of our investment strategies at Geoinvesting are based on long term fundamental undercurrents. However, we understand that there are opportunities to make money in the short term when certain opportunities arise. We admit that we need to leave our egos at home and at least consider them from time to time.
Like this post if you want us to put some more emphasis on the research and tracking of SPACs. It comes in waves, so let’s catch the next one.
~Maj Soueidan, Co-founder GeoInvesting