Shares of SPAC, the firm linked to Trump social media venture, down as short seller targets it

Washington, US Updated: Oct 26, 2021, 06:24 PM IST

(File Photo) Former US President Donald Trump Photograph:(Reuters)

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The stock surged following the announcement and remains up over 700 per cent since the deal was unveiled

Shares of the blank-check acquisition company that plans to publicly list former US President Donald Trump's new social media venture fell on Monday after an eye-watering rally last week, as a short-seller said it was betting against the company.

Digital World Acquisition (DWAC.O), a Miami-based special purpose acquisition company (SPAC), fell 10.98 per cent, its first declining session since announcing Wednesday it would merge with Trump's media company to create a social media app called TRUTH Social. read more

The stock surged following the announcement and remains up over 700 per cent since the deal was unveiled.

Earlier on Monday, short seller Iceberg Research tweeted it was betting against the company’s shares.

“We are short $DWAC. Now that initial excitement has passed, we see only risks for investors in near future. Based on Trump's track record, at current price, renegotiation is likely to keep more of the merged company for him,” Iceberg Research tweeted.

Iceberg, which publishes a blog with its research on Wordpress, gained attention in 2015 for highlighting what it called aggressive accounting practices at Hong Kong-based commodities trader Noble Group. Noble denied the allegations but subsequently saw its profits collapse and was forced to sell most of its assets.

The company said earlier this year that it was short popular meme stock AMC Entertainment Holdings (AMC.N). 

Digital World Acquisition's recent surge is reminiscent of the meme stock frenzy earlier in 2021, when an army of retail investors on Reddit fueled hyper-rallies in GameStop Corp (GME.N), AMC Entertainment Holdings and other stocks.

Twitter (TWTR.N), Facebook (FB.O) and other social media platforms banned Trump from their services after hundreds of his supporters rioted at the U.S. Capitol on January 6.

TRUTH Social is set for a beta launch next month and full rollout in the first quarter of 2022.

SPACs allow private companies to publicly list their shares while sidestepping traditional initial public offerings.