Donald Trump’s potential Wall Street comeback has sparked a meme-trading frenzy surrounding the former president. Shareholders of Trump Media, the parent company of Truth Social, approved a merger with Digital World Acquisition Corp, causing shares of DWAC to surge over 100% this year. The trading frenzy surrounding Trump Media is reminiscent of the surges seen in meme stocks like GameStop and AMC Entertainment. However, many experts are questioning whether Trump Media is a solid investment or if it is overvalued, particularly after the company reported a $26 million loss in the third quarter of last year.
Yale law professor Jonathan Macey has labeled the stock price of DWAC as a bubble, stating that no rational investor would take the stock at face value, especially if they had to hold it for an extended period. This skepticism was reflected in a 13.7% decline in DWAC shares on Friday. The lack of response from DWAC and Trump Media to media inquiries adds to the uncertainty surrounding the merger and the future of the companies involved. Meme stocks are known for their cult online following and extreme price swings, with GameStop being one of the first notable examples of this trend.
On Truth Social, more than 8,000 members participate in a chat group dedicated to discussing the DWAC shareholder vote and posting memes and supportive messages. The group has established rules to prevent the promotion of short-selling and urges members to provide evidence when sharing opinions or recommendations about the new company, which is set to trade as Trump Media & Technology Group. Meanwhile, Trump faces a looming deadline to secure a $464 million bond in a civil fraud case, which could result in the seizure of his assets if he cannot pay. Despite the potential benefits of the merger, it is unlikely to alleviate Trump’s current financial challenges, as key shareholders have agreed to hold onto their stock for six months after the merger is approved.
The frenzy surrounding meme stocks and the potential Wall Street comeback for Donald Trump highlight the volatile nature of the stock market and the influence of online communities in shaping trading trends. The surge in DWAC shares may be driven by speculation rather than fundamental value, leading to concerns about the sustainability of the company’s stock price. Trump Media’s recent financial losses further add to doubts about the company’s long-term prospects and the wisdom of investing in its stock. As the merger with DWAC moves forward, investors will be closely watching for any developments that may impact the future performance of Trump Media and Truth Social.
The rules established in the DWAC shareholder group chat aim to maintain transparency and prevent misleading information from influencing trading decisions. By discouraging stock pumping and requiring evidence to support opinions, the group seeks to create a more informed and responsible trading environment. Trump’s financial pressures and the potential consequences of failing to meet his legal obligations underscore the complex challenges he faces despite the potential windfall from the merger. The agreement among key shareholders to maintain stability in the company’s leadership and governance suggests a cautious approach to managing the transition following the merger and highlights the importance of maintaining investor confidence in Trump Media.
