If the special purpose acquisition companies jumped the shark, maybe they did it with Acquisition of the digital world (NASDAQ:DWAC). Trump’s so-called Special Purpose Acquisition Company (SPAC), Digital World is the blank check company that will take the media company from the former president Trump Media & Technology Group (TMTG) public. The underlying DWAC stock is the popular social media platform Truth Social.
Personally, it’s hard not to see Digital World as a controversy within a controversy. On the one hand, the vehicle through which TMTG will enter the capital market has raised eyebrows. As you probably know, PSPCs are incredibly dilutive because their architecture allows sponsors to distribute shares and warrants that can not ultimately contribute cash to the final business combination.
In addition, since the start of the year, SPACs have underperformed the benchmarks. With DWAC stock having lost 20% of its value since the October 28 session, some stakeholders may have a worrying feeling in their guts.
At the same time, let’s be fair and balanced. While PSPCs can be incredibly risky, they also offer opportunities that might not otherwise be available to retail investors. And given the controversy over former President Donald Trump himself, some investment banks might skimp on assuming the risk over a traditional initial public offering.
Casual observers are concerned about the potential underlying impact of the DWAC stock. For example, Truth Social presents itself as an alternative to censorship. But the question is, why is some content censored in the first place?
Primarily as a business concern, mainstream social media platforms censor content and behavior to counteract toxicity. Therefore, the alternative to such a dynamic could well lead to more toxicity (as long as you don’t attack the platform itself!).
DWAC share could be an investment with high potential
It is therefore not surprising that many have criticized the DWAC stock. Indeed, an expert in cybersecurity, in an interview with the Daily beast, went so far as to assert that Truth Social is heading towards a “series of embarrassing security and policy failures. “
I won’t go that far, but the fact remains: Trump is deeply unpopular in many circles. Theoretically, therefore, DWAC’s stock is heading for trouble.
However, I have a contrarian attitude – and not because I want to go against the grain for its own sake. On the contrary, I sincerely believe that you can make money with DWAC stocks in the longer term. Depending on your personal feelings, you may need to cover your nose, but the opportunity is there.
While the immediacy bias leads us to believe that the frenetic nature of the Internet has become a problem under the Trump administration, in reality, the Internet has always had a dark underbelly. For example, if you had paid attention to the comments section of Yahoo, you would have received more than your fair share of xenophobia and other opinions that many Americans will find offensive.
In a 2012 article by American scientist demonstrated, people have been angry on the internet for a long time. As the article explains, distance and lack of accountability allow hate to flourish online. The difference with DWAC stock is that finally retail investors have the opportunity to profit from a very robust move.
Yes, DWAC stocks can be nasty, but neither can investing in tobacco companies or private prisons.
Numbers might actually work
The concept of right-wing social media platforms is nothing new. Without giving oxygen to some organizations, let’s just say that websites and public forums in the service of extremist ideologies have always existed. Additionally, the best examples performed well against their total addressable market.
But does the historic strong performance of right-wing content suggest that the business combination underlying DWAC stock stands a chance? Last year, Mcdonalds (NYSE:MCD) abandoned his sponsorship of NASCAR driver Kyle Larson after dropping the N Bomb. Naturally, companies avoid such controversies given the horrific history of racism, colonization and exploitation.
Yet, from an objective standpoint, Voanews.com indicates that right-wing extremists’ talking points thrive online despite concerted efforts to thwart such content. To me, information like this suggests that the demand for this content is alive and well.
But what size are we talking about a demand image? Given the relatively tight nature of the 2016 and 2020 elections, I think you can take the Number of daily active users in the United States for Twitter (NYSE:TWTR) and divide it in the middle. But to be conservative, let’s say 40%. This gives us a national potential market size of 74.4 million for Truth Social.
In the grand scheme of things, it is not a large number. However, those 74 million plus people could be exceptionally loyal. While people on Twitter may be sated with idolizing inane celebrity posts, people on Truth Social are there for ideological reasons.
Let’s be clear: such stories can be incredibly dangerous. But they’re also incredibly profitable for the right kind of business, in the same way that certain kinds of fear benefit gunmakers or survival gear retailers.
Balancing profitability with principles
Ultimately, whether you want to get involved in the DWAC stock depends on your particular comfort level. I think if you ask most people, they’ll see Truth Social as more harmful than beneficial. We’ve already seen how radicalization doesn’t materialize at the commercial end of a gun but rather reckless narrative to the point of vulnerability.
And this leads to the rise of troubled youth in America. Without proper guidance and guidance, impressionable young people can find themselves drawn to controversial content. The power of Truth Social and the Trump aura is that they tap into genuine frustrations, but unfortunately, they can steer collective emotions into unproductive (and sometimes destructive) activities.
Yet making money with cynicism is unbelievably and unbelievably easy. This is why you could reap significant benefits from DWAC shares. Just be careful not to lose any part of yourself in the process.
As of publication date, Josh Enomoto did not hold (directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, submitted to InvestorPlace.com Publication guidelines.
Former senior business analyst for Sony Electronics, Josh Enomoto has helped negotiate major contracts with Fortune Global 500 companies. Over the past several years, he has provided unique and essential information for the investment markets, as well as for various other sectors, including law, construction management and health.