On Thursday, a SPAC deal was announced to bring a new social media platform and other businesses from former President Donald Trump to the public markets.
The SPAC Deal: Trump Media & Technology Group is merging with Digital World Acquisition (NASDAQ:DWAC) in a deal valuing the company at $875 million and up to $1.7 billion based on future earnouts. The company is planning to launch the TRUTH Social platform in beta in November.
Historical Move: Shares of DWAC ended the day up 356.8% to $45.50. The warrants, which trade as DWACW were up 2,114% to $11.29.
Klymochko, who runs a SPAC and Merger Arbitrage ETF, told Benzinga the moves could bring interest back to SPACs.
“I believe it may reinvigorate the SPAC market and bring back retail interest in a big way,” Klymochko said. "It showcases the tremendous risk-reward dynamic of pre-deal SPACs. Very limited downside with tremendous upside. Perhaps the best risk-reward profile of any security out there.”
Klymochko called the move in DWAC unprecedented for SPACs. The last day-one pop close to this move remembered by Klymochko was TPG Pace Beneficial Finance Corp (NYSE:TPGY), which hit over $24 on a deal announcement.
Lucid Group Inc (NYSE:LCID) shares traded for over $60 pre-deal announcement as ticker CCIV but never saw a one-day pop this significant and saw shares decline on the official deal announcement.
“I thought it would bounce out of the $10 area, because most SPACs have a hard floor at $10, but I never thought it would do this,” said PreMarketPrep co-host Dennis Dick.
Dick pointed to Trump’s large social media following and a new app having the potential for huge traffic just based off of his followers.
“I would have thought Twitter would trade lower on this, but it’s holding up well," Dick said. Twitter shares were down 1% to $65.40.
Huge Volume, Trending Topic: Over 477 million DWAC shares were traded on Thursday, making it the highest volume SPAC on the day by a significant margin, with the next highest a new issue SPAC unit trading over 12 million shares. The move also marked a significant move for a company with a float of under 30 million shares trading hands 17 times over.
Popular stocks like Apple (NASDAQ:AAPL) saw volume of 61 million shares Thursday and has an average daily volume of 76.6 million in the last 100 days. Tesla Inc (NASDAQ:TSLA) saw 31 million shares trade compared to an average daily volume of 18.5 million for the last 100 days.
“There will be like $10 billion worth traded on a $290 million SPAC. That is, as Trump would say, yuge,” Klymochko said.
DWAC was the number one trending ticker on StockTwits all day. The SPAC deal and Trump’s new app were among the top trending items on Twitter.
PHUN Shares Pop: While in office and on the Twitter platform, Trump could have large influence over items and many often looked for trades related to his tweets.
“Phunware announced partnership with American Made Media Consultant on development, launch and ongoing management of the Trump-Pence 2020 Reelection Campaign’s mobile application,” a May 2020 USA Today article reads.
Phunware Inc (NASDAQ:PHUN) shares surged 46% Thursday to close at $1.53. In after-hours trading, PHUN shares are up 33% to $2.04.
“Our software provides the Trump-Pence team with powerful mobile tools for their high profile reelection campaign, allowing seamless one-to-one user engagement and interactions on a reliable and proven global platform,” Phunware CEO and co-founder Alan S. Knitowski was quoted as saying in the article.
There has been no official connection between Phunware and the new Trump SPAC or app.