Concentrated Bursts of Advertising Followed by Halts Before Beginning Again
WASHINGTON – Trading in the NASDAQ tech sector Th looked more similar a Wild Westward shootout than it did a regular trading day on Wall Street. The reason? A Trump related SPAC spec. Namely, the almost crazed action in an obscure SPAC spec named Digital World Acquisition Corp. Symbol on the NASDAQ: DWAC. The reason for that? Seemingly out of the blueish, news dropped Thursday that Donald Trump would finally make good on his promise to milkshake up social media and beyond.
Trump proposed to do but that by merging his own fledgling startup with DWAC, a special purpose acquisition company (SPAC). That's substantially the manner an entity tin aid its stock go public without involving all the usual (and costly) IPO-SEC-prospectus-registration-roadshow protocols.
What'due south a SPAC?
SPACs themselves are just fat moneybags sold in shares every bit a speculative future investment fund. SPACs become public olely for the purpose of providing a merger vehicle for interesting, usually speculative ventures. They've become a pop hazard, particularly during the Covid pandemic-turned-endemic. That'south remained true fifty-fifty though most SPAC mergers have ended upwards existence notable flops later on the initial merger excitement dies down.
But not then in this instance. The fact that DWAC'south apparent merger partner – Donald Trump's new media visitor – comes with its own backstory. One that's and so well known that it doesn't bear repeating here. And then take that, Facebook (NASDAQ: FB) and Twitter (NYSE: TWTR).
CNBC drills down on the particulars of this Trump related SPAC spec.
"… the yet-to-be-launched Trump Media & Technology Grouping said its 'mission is to create a rival to the liberal media consortium and fight back confronting the "Big Tech" companies of Silicon Valley, which have used their unilateral ability to silence opposing voices in America.'"
This already sounded good to an awful lot of investors, from retail to hedge funds. Some had probable owned this SPAC before it took off faster than a SpaceX rocket.
DWAC shares suddenly blasted off from Th's opening trade. They jumped from from prices around $10-12 per share to as loftier every bit $50 on heavy book. They shortly settled back to a "new normal" around $45 per share at the closing bell. That'due south a practiced 400% spring on the twenty-four hours.
But Friday, that new normal didn't last very long. In short bursts punctuated by trading halts, the stock skyrocketed even higher to around $130 per share. Once once more on high volume. The increasingly restrictive CNBC site provides the following color.
"Trading in the stock was halted due to volatility multiple times in morning trading Friday. The SPAC, which trades under the ticker DWAC on the Nasdaq, skyrocketed 216% at one point and last traded upwards 150%."
Since it's stutter-pace opening trade, DWAC quickly settled back to the $70 range before beginning its 2nd run. Equally we write this at 12:40 p.m. ET, the shares keep to trade at effectually the $114 mark. Who knows where they'll end their frantic trading week. When a stock gets this volatile and trades at such loftier volumes, predicting closing prices become an exercise in futility.
Who's behind the big rally in this untested Trump related SPAC spec?
What'southward spurring the big rally in DWAC shares also likely enthusiastic buying likely coming from frustrated MAGA supporters on the retail side? CNBC thinks the positive action has already spread to the Reddit meme-trading community besides.
"Signs emerged that pocket-size-time retail investors could be behind the monstrous rally in the SPAC. On Th, DWAC the unmarried most actively traded stock on Fidelity's brokerage platform. Meanwhile, the ticker was amid the most popular mentions on Reddit's WallStreetBets. The SPAC was also a trending topic on Twitter, which indicated that DWAC could exist having a meme stock moment similar GameStop and AMC.
"One peak post on the WallStreetBets message lath Friday morning featured what appeared to be the user'due south equity portfolio, touting daily gains of over $ten,000 from betting on the SPAC. The post, which called the former president 'Daddy Trump,' quickly drew more than 800 comments."
Spinoff effect caused past media hype
And at that place'due south been a spinoff consequence from the current media hype most DWAC. Investors wary of rapid stock ascents (which tend to be followed by equal and contrary declines) often look for alternative, potential ally stocks that might exist involved in Trump's new venture. Alternative in the sense of hitching a ride on the activity without chasing the principal target company. Over again, CNBC…
"The Trump upshot wasn't limited to DWAC.
"Phunware, the advertizing software startup involved with Trump'south 2020 reelection campaign, jumped in unison with DWAC. The stock last traded upwards a whopping 624% to $eleven.09 per share Fri, bringing its calendar week-to-engagement rally to well-nigh 980%."
We decided to hitch a small ride on this juggernaut Thursday when DWAC shares settled down a flake. They never did. So nosotros took a chance and took 3 pocket-sized nibbles at 3 different time intervals. At this point, nosotros've been and then well rewarded, we wish nosotros'd caused more.
Time for a Trump related SPAC spec in our own portfolios?
Just stocks gone wild are hard to enter and exit at specific prices, which makes playing this game risky, peculiarly if you make it on the wrong side of the merchandise. This, added to Thursday's frustrating trading halts, made it tough to be precise, particularly early on in the mean solar day when prices were much cheaper.
But that said, nosotros'll ride what we have, and if DWAC really crashes, we might play with a few more than shares. But for now, we consider this one an excellent Trump related SPAC spec. And that include "sister stocks" DWACW and DWACU.
The onetime, a cheaper investment per se, dollar-wise, is like a long-term option. It gives you the right to purchase DWAC shares at a specific price and for a sure elapsing of time. Simply right now, since DWACW has neither an exercise price (the DWAC price you lot tin can trade the warrants in for actual shares) nor a specified time duration, this one's a real gamble.
The latter – the ane ending in "U" for "units" – bundles 1 DWAC share with 1 DWAC warrant. So this one trades at something of a hybrid price. This one could be a proficient deal, as the warrants you get are technically a complimentary ride. Nevertheless you are paying for a premium for these units. And in one case once again, who knows what the warrants are worth.
About speculative investing: Don't hazard with coin you lot tin can't afford to lose
We consider our small investment here every bit pure spec. The eventual Trump entity currently has no real numbers, no existent track record, and only the slightest indication of the various directions this company might head. But that'due south pretty much the same story with virtually speculative SPAC mergers. Then it'south caveat emptor all the style. Obviously, we, ourselves, aren't willing to bet the ranch on this i. But so far, the last 24 hours accept been fun.
Only possibly the next 24 hours could turn united states suicidal. That's how these things work. Your mileage may vary.
A small bet on Netflix escaping from a wokist internal revolt vs. Dave Chappelle's "The Closer" special
On other fronts, nosotros also bought a small position in Netflix shares (NASDAQ: NFLX) before this week when trans employees and company sympathizers threatened to walk off the job to protest the visitor'southward latest Dave Chappelle comedy special, "The Closer." The media hyped this threatened job action / protestation beyond reason, speculating that over 1,000 employees would walk off the task.
Nosotros idea this was pure nonsense. But Netflix management's PR efforts to contain this latest of today's frequently occurring pro-trans threats and bullying actions bordered on the cowardly at times, probable scaring many investors. They promptly mass-dumped NFLX shares, causing a huge downside blow off. It was at that indicate that we jumped in to take a (very) small position, figuring this was another piece of overhyped PC nonsense that had already jumped the shark.
The subsequent "mass-walkout" proved to be a joke. Apprentice alive videos seemed to evidence that less than 50 disgruntled individuals took function in this protest. They were even countered by a few pro-Chappelle, pro-comedy counter-protestors, making the exercise downright funny at times. The stock almost instantly recovered its unabridged loss Thursday, and shares hitting a new yearly loftier as well.
2 observations:
Politically, people are getting tired of hyper-political, hyper-militant LGBTQWTF tyrants. This statistical minority of United states of america extremists – a tiny minority even in their own communities – has no right to ready policy for anyone. Simply knuckling under to them is a mistake every bit it simply encourages more bullying and tyranny.
From an investment standpoint, when any extremely overdone reaction to a corporate event, including boycotts and / or protests, crushes a perfectly skillful, investible stock, information technology's often smart to jump in when you lot encounter a bottom in these shares and pick some up. The result – often but not always – is a quick reversal that allows yous to lock in a ridiculously high profit for just a day'due south work. (Or maybe ii.)
So have a good weekend. And bask the Dave Chappelle Netflix special before you tin can't.
Source: https://www.commdiginews.com/business-2/trump-related-spac-spec-continues-wild-nasdaq-ride-in-friday-trading-140849/
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