Following reports that it would merge with Trump Media & Technology Group, shares of Digital World Acquisition Corp (NASDAQ: DWAC) have been all over the place.
After rising 1,650% last week, the stock is down 57% from it’s all time high of $175 per share to $75 today.
It all started last Thursday, when nearly 500 million shares of DWAC were traded after its price jumped more than 350% in a single session.
It was by far the most actively traded stock on the combined tape of New York Stock Exchange and Nasdaq listings.
Then on Monday, trading volume for the SPAC first started lower. According to FactSet, around 64 million shares of DWAC changed hands.
That’s what made the stock easy prey for short sellers, especially hedge funds.
Also on Monday, short-seller Iceberg Research announced a bearish position on the DWAC, claiming that investors should be wary of this blank-check offer because Trump could end up as the majority shareholder following the merger.
In a tweet, Iceberg said, “Now that initial excitement has passed, we see only risks for investors in near future. Based on Trump’s track record, at current price, renegotiation is likely to keep more of the merged company for him. SPAC holders don’t own a piece of this project yet. Trump has leverage, not them.”
However, DWAC remained a popular online chatroom topic among retail traders, who turned the SPAC into the latest hot “meme” stock in 2021.
According to alternative data source Quiver Quantitative, the DWAC ticker was the second-most popular name on Reddit’s WallStreetBets chatroom on Monday, after Tesla, which achieved a $1 trillion market value on the same day.
One of the most popular posts on WallStreetBets was “DWAC – ALL IN,” which received nearly 700 comments.
So for now, it seems like we have another hedge fund vs. retail battle on our hands. Prudent investors should wait until we have more information before investing.
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