NEW YORK (AP) – The company planning to bring President Donald Trump’s new media venture to the stock market soared even further on Friday, as day traders keep piling in.
Digital World Acquisition Corp. nearly tripled in the first minute of trading before trading in it was temporarily halted. It then gave up a chunk of those gains and was sitting on a 60.4% gain at $73, as of 11:22 a.m. Eastern time. In the morning, it climbed as high as $175.
A day before, the stock more than quadrupled to $45.50 from $9.96 after it said it would merge with Trump Media & Technology Group. The new venture, with Trump as its chairman, aims to challenge Facebook, Twitter and even Disney’s streaming video service.
Experts are split on the company’s prospects, and the deal announcing its merger with Digital World Acquisition was unusual in how few details it offered investors. But the surge in its price indicates some investors are betting on it to be popular. .
Some investors appear to be believers in Trump’s ideology, while others see a chance for the company to quickly gain a big audience. A big chunk of investors, though, appeared simply to be grabbing a chance for a quick profit.
Several threads on Reddit’s WallStreetBets forum, where millions of traders share their successes and failures, had users bragging about how much money they made by jumping in and out of Digital World Acquisition Corp. Others were asking if they should listen to the fear they were feeling of missing out.
Trading in the stock was so furious, and swings in its price were so sharp that it was temporarily halted at least nine times in the first two hours of trading.
Digital World Acquisition is a special-purpose acquisition company, something that’s typically called a SPAC or “blank-check” company. Its sitting on a little less than $300 million of cash that it raised in its own initial public offering, before it went looking for a company to acquire.
SPACs can offer privately held companies a quicker and easier way to get their stocks on an exchange, by merging with them. They were wildly popular earlier this year, but activity had been receding as regulatory scrutiny on them and interest in them dimmed, at least until Wednesday’s Trump-related announcement.
Ít can be difficult for skeptical investors to bet that a SPAC’s price will fall, a move called “shorting,” said Michael Ohlrogge, an assistant professor of law at New York University who has researched SPACs. With few short sellers, that can remove a force pushing a stock’s price down, allowing it to jump even higher than it would otherwise.
“Overall, I think it’s a big difficulty because it leads to their prices being inflated,” Ohlrogge said.
All the action in Digital World Acquisition‘s stock is happening before investors have even had a chance to see a proxy statement, which will give details about the merger and possibly about how Trump Media & Technology Group will operate.
The last time Trump ran a publicly traded company, it didn’t end up well for investors. His casino company, Trump Entertainment Resorts, lost hundreds of millions of dollars over more than a dozen years and filed for bankruptcy several times, socking shareholders with big losses. Trump fared better. He took in $82 million in fees, salary and bonuses over the same period, according to Fortune magazine.
