The Digital World Acquisition (
) stock price tumbled by more than 10% as investors started taking profit. The DWAC stock is trading at $83.8, which is about 50% below its all-time high.
What is DWAC?
DWAC is a special purpose acquisition company (SPAC) that was relatively calm early last week. It had a market capitalization of about $300 million. Things changed when the company announced that it will merge with a new media company started by Donald Trump.
This company’s primary product will be a social media platform like Twitter. Unlike other liberal platforms, the platform will not have significant censorship. The platform will be targeted towards conservatives.
Later on, the company will launch a video platform that it hopes will compete with Netflix and Fox. It also aims to start a company to challenge big cloud companies like Amazon.
Is the Trump SPAC doomed?
Still, there are reasons to be worried about the new Trump venture and the DWAC stock price. First, as a media company, the firm will need advertisers. There is a high probability that many advertisers will keep off. That is because by doing so, they will be seen as though they are partisans.
Also, many of them still have memories of the insurrection. In the past, we have seen many advertisers cut ties with conservative media companies like Fox and Newsmax.
Second, the company could struggle to attract talent. Most people with skills in the industry will mostly prefer working for mainstream companies like Twitter and Facebook.
Third, DWAC faces the challenge of reaching out to a diverse group of people. Analysts believe that the main reason why Facebook and Twitter are successful is that they have people who lean in all sides of the political aisle. Indeed, existing social media platforms that cater to conservatives like Gettr and Parler have failed.
Another big challenge that DWAC faces is that it will need to be hosted in companies that tend to lean left like Apple and Google. In the past, we have seen these companies take down apps like Parler that have modest content moderation.Fifth, the Trump social media company comes at a time when such companies are struggling because of the new iOS updates. Last week, Snap’s stock price collapsed by more than 25% after it warned of the impact of the update. Facebook also warned about the update when it published its earnings on Monday.
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