Whatever else you might think of him, Trump is not a fool. So, when the former US president abandons his very own Twitter-like echo chamber of sorts, Truth Social, in favor of Elon Musk's X social media platform, the implications are multivarious not only for Trump's political fortunes but also those associated with the SPAC Digital World (NASDAQ: DWAC), which is slated to take Trump Media and Technology Group (TMTG) - the entity behind the Truth Social platform - public in a highly anticipated reverse merger.
https://t.co/MlIKklPSJT pic.twitter.com/Mcbf2xozsY
— Donald J. Trump (@realDonaldTrump) August 25, 2023
After a hiatus of two and a half years, Trump returned to X with a bang, posting his mugshot with a number of catchy slogans designed to reinvigorate his base.
I know that Trump is contractually obligated to post only on Truth Social, and on other media only after a delay. Is the cold feet about wanting to return to Twitter for his presidential campaign?
— @annmlipton@esq.social (@AnnMLipton) July 3, 2023
In early July, we noted that Trump might be having second thoughts vis-a-vis Truth Social. Specifically, Ann Lipton, a law professor at Tulane, cited an email quoted by the New York Times, which mentioned that the Trump Media and Technology Group was “currently only bound under the merger agreement [with Digital World] through Sept. 8, 2023.” According to the professor, this suggested at the time that Trump was having “cold feet” vis-à-vis his commitment to Truth Social and that he appeared to be angling to return to Twitter as his presidential campaign gained steam.
On a deeper level, Trump's return to X suggests that TMTG might not be interested in pursuing a merger with Digital World beyond the 08th of September, when the SPAC is slated to liquidate should it fail to secure another extension - via a shareholder vote - in the deadline to consummate its planned merger with TMTG by the 05th of September.
Additionally, as we noted yesterday, Digital World is now also facing the specter of punitive actions from the Nasdaq exchange on the back of dual delinquencies related to the filing of quarterly financial statements.
It was only recently that Digital World reached a settlement with the SEC for misleading investors by failing to disclose a number of merger-related preliminary discussions with TMTG as well as other investors in the spring and summer of 2021.
Trump has just 6.4 million followers on Truth Social. At the time of writing, the former US president's most recent tweet had already garnered 228 million views on the X platform, rendering Truth Social a has-been in Trump's shrewd political calculus. This, of course, sets the stage for an unraveling of the merger agreement between Digital World and TMTG. Devoid of its raison d'être, Digital World's stock price is almost guaranteed to take a deep plunge.
Do you think a short position on Digital World shares is now justified? Let us know your thoughts in the comments section below.
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