Anyone Trading Digital World Acquisition Corp. (DWAC)?
Posted: Fri Oct 22, 2021 6:31 amI'm really surprised that I didn't see a single comment on Digital World Acquisition Corp. stock (Ticker: DWAC) today. To say that the stock had a HUGE DAY would be a big UNDERstatement. If you don't follow the stock market, you can go on to another posting.
And this is a company with connections to Donald Trump and his endeavor to get into social networking to compete against Facebook (FB), Twitter (TWTR), etc. I fully realize Trump is a "love him or hate him" type person, but there is no real need to get into the political aspect of this. I just want to make some money. So let's forget about the political stuff in this thread.
After the run that Gamestop (GME) and AMC Theaters (AMC) had earlier this year, this could be another speculative stock that may go well beyond what it is truly worth. That doesn't mean you can't make some money on it (assuming you have the right appetite for risk).
First let's start with the stock (DWAC) and then I want to also discuss the warrants (DWACW) as an even cheaper (less overpriced) way to play this.
The stock had the following trading volumes and prices so far this week:
Monday the 18th: Closed at $9.97. Volume: 1,100
Tuesday the 19th: Closed at $10.01. Volume: 49,900
Wed. the 20th: Closed at $9.96. Volume: 697,900
Thurs. the 21st: Closed at $45.50 Volume: 488,826,100 (up sharply on UNBELIEVABLY HUGE VOLUME)
Thursday was the first real day where the general public was made aware of Trump's foray into social media. News came out well before the open- in fact I think it really came out Wednesday after the close. You could have had all the stock you wanted Thursday when it opened at $12.73. The stock got as high as a whopping $52.00 a share before closing at $45.50. In after hours on Thursday the stock got at least as high as $74.98- it could have been a bit higher than that, but that was the highest that a friend of mine and I saw it get.
Many still have fresh in their minds the so-called meme stocks from earlier this year. Those included Gamestop (GME) and AMC Theaters (AMC), which had absolutely huge runs before they settled down, if you even want to call it that. Whether you love or hate Trump, let's set that aside. There is an opportunity for those with some speculative money and an appetite for risk to make some money (and perhaps a lot) on Digital World.
I'm not making any formal predictions on the DWAC stock price. That said, it absolutely wouldn't surprise me if it went to $100-200 or even much higher. Geez, I could see it hitting $100+ a share even today (Friday). See my disclaimer on risk below.
To show how conservative this prediction is (potentially), let's look at what happened in January to Gamestop. On January 4th of this year, the stock hit an intraday low of $17.15. It was mostly trading 6-7 million shares a day or so. On January 13th the volume spiked to a whopping 144 million shares. The price didn't peak until the 28th when it hit a whopping $483.00. So this wasn't a 1-2 day event. It was absolutely wild for over two weeks. Of course that doesn't mean the same thing will happen with Digital World, but I just wanted to paint a picture of what is possible and has already happened recently with another stock.
Now we've talked a bit about the stock, but I also want to discuss the Digital World warrants. Each warrant will allow holders to exchange 1 warrant for 1 share of DWAC common stock at a price of $11.50. The warrants are a bit like stock options (puts and calls), but have a much longer expiration date. Options can expire in a month or even a week. These warrants (per the prospectus on the SEC/Edgar website) have an expiration of 5 years. Seeking Alpha's symbol lookup feature mentions a 7-year expiration, but I think that is a typo that will likely need to be corrected. I trust the SEC/Edgar website more, as that is where the official paperwork is filed. There is legalese about clauses where the warrants could expire worthless, etc., but I wouldn't get too hung up about that at this point. If you really are nervous about the warrants, buy the stock instead.
All that said, think about how undervalued the warrants are compared to the common stock. I said the common stock closed Thursday at $45.50. The warrants, which allow you to buy the stock for $11.50, should have closed somewhere near the price of $34.00 (the $45.50 close for the stock minus the $11.50 cost to convert the warrant into stock). Yet the warrants closed for only $11.29 on their first day of trading. Why would they be priced at less than 1/3 what they are worth? My speculation is that this stock caught a lot of people by surprise. Myself, I would have bought the warrants if I had known how cheap they were. But the stock was moving so rapidly and with such huge volume that I figured I'd trade the stock first and then study the warrants after the market closed to see what value there was in the warrants. After seeing the value, I bought the warrants in Thursday's after hours session.
Let's take this one step further. I've seen the common stock trade at $74.98 in after hours on Thursday and in the mid-70's (don't have the exact price) a/o 6:15am EST in Friday morning's pre-market session. Let's say for sake of argument that the common stock hits $100 in the next few days. That makes the warrants worth roughly $88.50. Even if you had to pay $30-40 to get them, that is a sizable profit. The warrants are much cheaper than the stock. Also, because they are so undervalued relative to the stock, there is good potential for them to outperform the stock in at least the short-term.
What does it take for the warrants to go up sharply, even if the stock doesn't? The public needs to be educated a bit on them and how they work. All it takes is for one person of note (or a few) to appear on CNBC, Bloomberg, SeekingAlpha.com, and/or Reddit to help educate the public about how cheap these warrants are relative to the stock. And this little bit of education could cause the warrants to go up really sharply.
Hey, I'm being somewhat conservative when you consider what happened to Gamestop. What if the common stock of Digital World hit $250-300 a share in the coming weeks. Remember, GME hit $483, so don't say that couldn't happen. At even $250 for the stock (slightly more than half the price that GME hit), the warrants are worth roughly $238.50 each. That is staggering when you think about it!
Now the disclaimer part. Sorry but this is important. No matter how exciting this may be to you, please don't risk money you can't afford to lose. You aren't buying Walmart or Coca Cola. This is a super volatile stock and should be treated like the roller coaster it is. Let's say you can afford to spend $10,000 on the stock or the warrants. If you go all in at one time and the stock goes down 20-30% quickly, you will be in a very stressful situation. If however, you split your money that you plan on speculating with into, say, 5 portions, you will likely have a much better chance of riding out a potential storm. In that case, you only invest, say $2k of the total $10k that you have earmarked (potentially) for this stock. If the stock quickly goes from, say $50 to $35 or so, you might consider buying another $2k of the stock.
There is more than one way to play the stock market. Some choose to buy and hold for long periods of time, even many years. If you are worth, say, $10 million and are only putting $10,000 into the stock or warrants, perhaps you can get away with that. For many, buy and hold causes them to become lazy about keeping up with important news at the company that can greatly affect the stock price. I can't in good conscience tell someone I'm comfortable in buy and hold on speculative stocks like Digital World.
When all is said and done, there is a VERY GOOD CHANCE that you will leave a lot of money on the table. I made about a 38% profit on the stock in about 50 minutes on Thursday. Heck, I could have more than quadrupled my money if I got in at the open and got out fairly close to the high for the day. I have no regrets, but the stock market can make people become very emotional about silly things (like not getting out at the very top, which, frankly, usually involves a lot of luck).
Good luck to all who choose to speculate in either the stock and/or the warrants! I look forward to any non-political comments that readers may have.
And this is a company with connections to Donald Trump and his endeavor to get into social networking to compete against Facebook (FB), Twitter (TWTR), etc. I fully realize Trump is a "love him or hate him" type person, but there is no real need to get into the political aspect of this. I just want to make some money. So let's forget about the political stuff in this thread.
After the run that Gamestop (GME) and AMC Theaters (AMC) had earlier this year, this could be another speculative stock that may go well beyond what it is truly worth. That doesn't mean you can't make some money on it (assuming you have the right appetite for risk).
First let's start with the stock (DWAC) and then I want to also discuss the warrants (DWACW) as an even cheaper (less overpriced) way to play this.
The stock had the following trading volumes and prices so far this week:
Monday the 18th: Closed at $9.97. Volume: 1,100
Tuesday the 19th: Closed at $10.01. Volume: 49,900
Wed. the 20th: Closed at $9.96. Volume: 697,900
Thurs. the 21st: Closed at $45.50 Volume: 488,826,100 (up sharply on UNBELIEVABLY HUGE VOLUME)
Thursday was the first real day where the general public was made aware of Trump's foray into social media. News came out well before the open- in fact I think it really came out Wednesday after the close. You could have had all the stock you wanted Thursday when it opened at $12.73. The stock got as high as a whopping $52.00 a share before closing at $45.50. In after hours on Thursday the stock got at least as high as $74.98- it could have been a bit higher than that, but that was the highest that a friend of mine and I saw it get.
Many still have fresh in their minds the so-called meme stocks from earlier this year. Those included Gamestop (GME) and AMC Theaters (AMC), which had absolutely huge runs before they settled down, if you even want to call it that. Whether you love or hate Trump, let's set that aside. There is an opportunity for those with some speculative money and an appetite for risk to make some money (and perhaps a lot) on Digital World.
I'm not making any formal predictions on the DWAC stock price. That said, it absolutely wouldn't surprise me if it went to $100-200 or even much higher. Geez, I could see it hitting $100+ a share even today (Friday). See my disclaimer on risk below.
To show how conservative this prediction is (potentially), let's look at what happened in January to Gamestop. On January 4th of this year, the stock hit an intraday low of $17.15. It was mostly trading 6-7 million shares a day or so. On January 13th the volume spiked to a whopping 144 million shares. The price didn't peak until the 28th when it hit a whopping $483.00. So this wasn't a 1-2 day event. It was absolutely wild for over two weeks. Of course that doesn't mean the same thing will happen with Digital World, but I just wanted to paint a picture of what is possible and has already happened recently with another stock.
Now we've talked a bit about the stock, but I also want to discuss the Digital World warrants. Each warrant will allow holders to exchange 1 warrant for 1 share of DWAC common stock at a price of $11.50. The warrants are a bit like stock options (puts and calls), but have a much longer expiration date. Options can expire in a month or even a week. These warrants (per the prospectus on the SEC/Edgar website) have an expiration of 5 years. Seeking Alpha's symbol lookup feature mentions a 7-year expiration, but I think that is a typo that will likely need to be corrected. I trust the SEC/Edgar website more, as that is where the official paperwork is filed. There is legalese about clauses where the warrants could expire worthless, etc., but I wouldn't get too hung up about that at this point. If you really are nervous about the warrants, buy the stock instead.
All that said, think about how undervalued the warrants are compared to the common stock. I said the common stock closed Thursday at $45.50. The warrants, which allow you to buy the stock for $11.50, should have closed somewhere near the price of $34.00 (the $45.50 close for the stock minus the $11.50 cost to convert the warrant into stock). Yet the warrants closed for only $11.29 on their first day of trading. Why would they be priced at less than 1/3 what they are worth? My speculation is that this stock caught a lot of people by surprise. Myself, I would have bought the warrants if I had known how cheap they were. But the stock was moving so rapidly and with such huge volume that I figured I'd trade the stock first and then study the warrants after the market closed to see what value there was in the warrants. After seeing the value, I bought the warrants in Thursday's after hours session.
Let's take this one step further. I've seen the common stock trade at $74.98 in after hours on Thursday and in the mid-70's (don't have the exact price) a/o 6:15am EST in Friday morning's pre-market session. Let's say for sake of argument that the common stock hits $100 in the next few days. That makes the warrants worth roughly $88.50. Even if you had to pay $30-40 to get them, that is a sizable profit. The warrants are much cheaper than the stock. Also, because they are so undervalued relative to the stock, there is good potential for them to outperform the stock in at least the short-term.
What does it take for the warrants to go up sharply, even if the stock doesn't? The public needs to be educated a bit on them and how they work. All it takes is for one person of note (or a few) to appear on CNBC, Bloomberg, SeekingAlpha.com, and/or Reddit to help educate the public about how cheap these warrants are relative to the stock. And this little bit of education could cause the warrants to go up really sharply.
Hey, I'm being somewhat conservative when you consider what happened to Gamestop. What if the common stock of Digital World hit $250-300 a share in the coming weeks. Remember, GME hit $483, so don't say that couldn't happen. At even $250 for the stock (slightly more than half the price that GME hit), the warrants are worth roughly $238.50 each. That is staggering when you think about it!
Now the disclaimer part. Sorry but this is important. No matter how exciting this may be to you, please don't risk money you can't afford to lose. You aren't buying Walmart or Coca Cola. This is a super volatile stock and should be treated like the roller coaster it is. Let's say you can afford to spend $10,000 on the stock or the warrants. If you go all in at one time and the stock goes down 20-30% quickly, you will be in a very stressful situation. If however, you split your money that you plan on speculating with into, say, 5 portions, you will likely have a much better chance of riding out a potential storm. In that case, you only invest, say $2k of the total $10k that you have earmarked (potentially) for this stock. If the stock quickly goes from, say $50 to $35 or so, you might consider buying another $2k of the stock.
There is more than one way to play the stock market. Some choose to buy and hold for long periods of time, even many years. If you are worth, say, $10 million and are only putting $10,000 into the stock or warrants, perhaps you can get away with that. For many, buy and hold causes them to become lazy about keeping up with important news at the company that can greatly affect the stock price. I can't in good conscience tell someone I'm comfortable in buy and hold on speculative stocks like Digital World.
When all is said and done, there is a VERY GOOD CHANCE that you will leave a lot of money on the table. I made about a 38% profit on the stock in about 50 minutes on Thursday. Heck, I could have more than quadrupled my money if I got in at the open and got out fairly close to the high for the day. I have no regrets, but the stock market can make people become very emotional about silly things (like not getting out at the very top, which, frankly, usually involves a lot of luck).
Good luck to all who choose to speculate in either the stock and/or the warrants! I look forward to any non-political comments that readers may have.
