By Thornton McEnery
On Tuesday, stock in a blank-check company that is under multiple federal regulatory investigations while merging with a nonexistent media company closed up 16.6% after naming a former dairy farmer as its chief executive officer.
The stock market does not get any meme-ier than this.
Despite disclosing on Monday that it is under investigation by Finra and the Securities and Exchange Commission , shares in Digital World Acquisition Corp. /zigman2/quotes/229933747/composite DWAC -0.13% shot up Tuesday thanks in part to news that the company’s very public merger target, Trump Media & Technology Group, will appoint Rep. Devin Nunes of California as its CEO when he retires from Congress at year-end.
Nunes, who came to prominence as a vocal supporter of Trump’s presidency and a fierce opponent of both of Trump’s impeachments, has a professional background in dairy farming. While he has no experience working in social media, Nunes is known to engage with it as proven by his well-publicized legal battle against a popular Twitter account called @DevinCow that pretends to be one of Nunes’s cows who is openly critical of the congressman.
What Nunes will be actually be in charge of after New Year’s Day remains a bit unclear.
TMTG’s current actual business model is still supported by retail investors on social media postulating that Trump’s millions of loyal voters will pay for access to TMTG’s media offerings, none of which currently actually exist.
Nonetheless, that still only notional business model has been rocket fuel for DWAC, sending its shares soaring almost 845% after the planned merger with TMTG was announced in October, thanks to individual retail investors piling into the stock in the belief that Trump’s apparently enduring political popularity and television fame will be a can’t-miss chance to HODL.
And thanks to a $1 billion private investment in public equity, or PIPE, deal that DWAC also somehow closed on Monday, institutional investors buying into the SPAC are now sitting on some nice piles of discounted shares that they will be more than happy to unload on bullish retail investors the moment SEC chief Gary Gensler lets this deal close.
But while DWAC has moved with the kind of meme-stock volatility we’ve become accustomed to watching among names like GameStop /zigman2/quotes/203755179/composite GME +3.39% and AMC Entertainment /zigman2/quotes/200235402/composite AMC +3.39% , it still has that one major difference from its fellow meme stocks: It’s going to market without any concrete revenue-generating product, making it a pure meme play.
On Reddit, sentiment on the SEC probes and Nunes’s hire fell predictably along political lines with Trump loyalists hailing all the news as bullish for the stock and Trump critics predicting disaster. Along with Tuesday’s gains, short interest in DWAC also grew by almost 6% on Tuesday, according to data from Ortex.
All of this activity just offers more proof that the DWAC/TMTG merger is a play to leverage the Trump political brand as an investment-grade product, meaning that in the era of meme stocks the promise of the thing on its own might be more valuable than rushing to actually create the thing.
Simply put, the teams behind DWAC and TMTG don’t need to worry about building a media company because they have already built a fully formed meme stock.
For proof of that concept, one need look no further than an SEC filing DWAC submitted on Monday containing an updated version of the TMTG presentation from October that we were quick to point out at the time felt very, very thin on actual financial/business data.
In Monday’s document, TMTG appeared ready to thicken that thin soup with a sprinkling of details, and the end result was breathtaking.
One new slide in the presentation introduced potential investors to TMTG’s “technology team.” The flow chart of 30 people is made up of full first names and initials for surnames — except for one mobile developer named “BJ” — and indicates that they hail from such companies as Apple, IBM, Netflix, America’s Funniest Videos and Little Debbie Snacks.
And while it might not be feasible to gather a deeper understanding of the strength of this team, that might be OK, since a footnote on the slide reads, “Personnel subject to change”
Another new slide speaks to TMTG’s “infrastructure.” The documentation indicates the company will have things like “users” and multiple servers — and then defines those terms for us. A following slide features a visual indicating how those terms interoperate.