DWAC Stock: Is Trump SPAC A 10 Or A 0?

Upside

Trump’s SPAC, Digital World Acquisition Corp. (NASDAQ:DWAC) last reported $10.41 per share in trust. As of today, it probably has around $10.47. This amount, 10 and change, is the reasonably likely upside if the SPAC liquidates or for holders who redeem their shares. The sponsor’s other SPACs were both liquidated; I think this one probably will liquidate too.

The SPAC’s disclosures delicately touch on Trump’s business history, noting that:

A number of companies that had license agreements with President Trump have failed. There can be no assurances that TMTG will not also fail.

Bankruptcies include The Trump Taj Mahal, The Trump Plaza, the Trump Castle, Trump Hotels & Casino Resorts, and Trump Entertainment Resorts. Other failures include Trump Shuttle, Trump University, Trump Vodka, Trump Mortgage, GoTrump, and – two months after its launch – Trump Steaks.

For the sake of brevity, it isn’t worth cataloging the 3,500 legal cases involving Trump, but after extensively sampling charges against him, the DWAC filings admit:

The foregoing does not purport to be an exhaustive list.

None of this will comfort the SEC as they review DWAC’s proxy material, which is why I conclude that the upside scenario is mildly more likely.

Downside

If the SEC approves the proxy and the contemplated transaction is consummated, PIPE investors will dilute outside passive minority investors into oblivion. After the trust money is redeemed or spent, the remaining value is 0ish.

This company came out of nowhere and appears to be quickly returning to nowhere according to Google (GOOG) (GOOGL) Trends:

Truth Social is struggling on both the Apple (AAPL) App Store and Google Play Store:

Problem

The good news is that the upside scenario appears somewhat more likely to me than the downside. It is hard to quantify, but I think that the probability of the upside is at least two out of three. Meta (META) has approved letting Trump back on Facebook and Instagram while Elon Musk allowed him back on Twitter, likely the death knell for this deal.

The bad news is that the upside, downside, and probability justify a price of around $10 today and (much much) closer to $0 if the deal goes through but shares trade over $15. This makes no sense.

Caveat

The price made no sense in 2021 when I first discussed it.

It made no sense in Q2 of last year.

It made no sense in Q3 of last year either.

So the price could remain irrationally high until the deal is abandoned or consummated.

Conclusion

DWAC is worth 1x cash.

TL; DR

If you own DWAC: sell it. If you don’t own DWAC, consider buying it only for a significant discount to the liquidation value before the redemption deadline. When, as now, it trades significantly above cash in trust, short it or buy puts.