(Bloomberg) — Investors bought shares of Digital World Acquisition Corp., the blank-check company that would merge with Donald Trump’s social media company, after the former president hinted at plans to make another bid for the White House.
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The special acquisition company rose 66% in the biggest one-day advance since its first blow when the merger was announced as millions of shares switched hands. Warrants linked to the SPAC rose 125% to $9.30, while Phunware Inc., a software company working on Trump’s reelection campaign, rose 38% and video platform Rumble Inc. increased by 3.8%. Rumble says it is “designed to be immune to cancel culture” and has a pact with Trump Media & Technology Group.
Digital World’s gains accelerated as the session progressed as more than 32 million stocks changed, nearly 33 times the activity seen on average over the past month. The volume of the call options surpassed that of the puts on the stock by a ratio of more than 2:1, with calls with a strike price of $30 expiring on November 11 and November 18 being the most actively traded.
The gains for companies linked to Trump came after he reiterated a boast that he is leading polls for the GOP nomination. Trump tentatively plans to announce his 2024 campaign the week after the US midterm elections, people familiar with the matter have told Bloomberg.
Digital World has been volatile as the SPAC’s sponsors fail to convene its mostly retailer base to vote on extending the deadline for the Trump Media & Technology Group merger. Shares fell 70% from a year ago to Friday’s close amid sluggish demand for Truth Social and as investors weigh how Elon Musk’s purchase of Twitter Inc. could affect his future.
The stock has been a favorite among retailers since its announcement last year. Although their purchases have been delayed, they have pushed the SPAC to be the best performing of its kind. With Monday’s gains, it is trading at a premium of more than 185% over the $10.20 holders who would get if the deal collapses.
“Any news about Trump will spark interest,” said Matthew Tuttle, chief executive officer at Tuttle Capital Management. “If Trump becomes president again, it could be good for DWAC, at least in the short term. Longer term, we have to remember that if his enemies want to get him, anything with DWAC might be low-hanging fruit.
Retailers actively discussed Digital World on Monday. The ticker was trending on Stocktwits and was one of the most frequently mentioned companies on Reddit’s WallStreetBets forum, rivaling listings for retailer favorite Tesla Inc. Despite the touts, trading was modest among Fidelity customers with buy orders narrowly exceeding sell orders.
Short hedging could also be part of the power, an action where investors take some of their negative bets if the stock rises. According to data from S3 Partners, nearly 13% of Digital World shares available for trading are currently being sold short.
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