By now, you’ve likely seen the news…
Former President Donald Trump is jumping into the special purpose acquisition company (SPAC) craze.
Trump is planning to take his new social media venture, TRUTH Social, public through a merger agreement between Trump Media & Technology Group (TMTG) and Digital World Acquisition Corp. (DWAC).
According to a press release, the merger will carry a cumulative valuation of up to $1.7 billion for TMTG.
But with the recent market action, that valuation has since increased.
And a nation-wide rollout of the platform is expecting to occur during the first quarter of 2022.
When it was announced last week that DWAC would be the shell company to merge with President Trump’s new social media company, the shares skyrocketed.
It’s become the new “meme stock” on the block.
As you can see in the chart below, shares were up as much as 1,657% at the highs last week.
It was a wild ride, but the stock is slowly coming back down to Earth.
The shares ended last week with a whopping gain of 846%, although as of this writing they’ve fallen 34% so far this week.
At current prices of around $62 a share, the stock still has a gain of about 524% since last week.
Investors Taking Notice
The financial media is trying to dismiss Trump’s attempt at building a social media platform.
But investors aren’t laughing.
Look at what’s happened to the competition since late last week…
Facebook, Inc. (FB), which has had its own set of problems recently, is down over 8% since the announcement.
Twitter, Inc. (TWTR) is off by 15%.
And shares of Snap Inc. (SNAP) fell a whopping 30%, although part of that decline was also due to SNAP’s poor earnings numbers.
Combined, these three stocks have lost $124.6 BILLION in market value… in a week!
By comparison, Trump’s DWAC is currently valued at over $2.2 billion.
Now, as we’ve seen with many hot stocks over the last few years, it’s not uncommon for them to initially skyrocket only to come crashing back down.
Remember the 80/50 Rule we talked about last week?
It comes from legendary trader Mark Minervini, who says that once a secular market leader puts in a major top, there’s an 80% chance it will decline by 50% and a 50% chance that it will decline by 80%.
However, DWAC is not necessarily a secular market leader, and it’s hard to say if we’ve seen the top in the stock just yet…
So, if it gets traction and begins to see success, don’t be surprised if the stock goes up another 10X from here.
SNAP is currently worth about $84 billion, TWTR is valued at $44 billion and FB is way ahead of them both at a massive $876 billion.
If TRUTH Social becomes a legitimate contender in the social media space, a rise of 10X from current levels would value it at only a fraction of its peers.
I’ll let you know if I decide to jump into this stock, but for now I’m staying on the sidelines until the price action develops a bit further.
Embrace the Surge,
Ross Givens
Editor, Traders Daily Direction
