Early Investing

Trump Media and Technology Group Looks to Tackle Big Tech

Trump Media and Technology Group Looks to Tackle Big Tech
By Adam Sharp
Date October 22, 2021

Full disclosure: I own a small amount of DWAC shares (.02 percent of portfolio investment). Note that this is a highly speculative investment and is already up a ridiculous amount. Do not construe this as financial advice. 

On Thursday, former President Donald Trump launched a special purpose acquisition company (SPAC) for a new publicly-traded company. The company’s name is Trump Media and Technology Group (TMTG). The SPAC’s ticker is DWAC for now (SPACs allow companies to go public more quickly than traditional initial public offerings, and the ticker will eventually change).

In the short term, Trump and his partners are trying to build a social media ecosystem for conservatives. Trump had more than 146 million followers before he was banned from Twitter, Facebook and Instagram. Many of these followers are expected to be early adopters of TMTG’s social media platforms. But the company also wants to expand into the realm of “Big Tech” over time.

Conservatives increasingly feel their posts are being censored and “throttled” on the big tech platforms. Like Trump, many conservatives and anti-establishment voices are being “de-platformed,” as I noted back in October 2020

Many smaller independent creators are also being “de-platformed.” YouTube recently deleted The Last American Vagabond — a channel with 2,000 videos and 5 million views. They didn’t really explain why, except to say the channel violated their “community guidelines.” 

A lot of these people who get banned express unusual or controversial views — like intricate conspiracies about COVID-19. If you disagree and think the content is hogwash, that’s fine. But censorship isn’t the answer. And I think censoring voices will hurt these big tech platforms in the end.

It’s a fascinating story. Potentially the most popular social media voice in the world, Trump, was banned by all the networks. So now he’s starting his own.

TMTG’s first focus is to create a Facebook competitor called Truth Social. The company claims it will serve as a platform that supports content from all ideologies and promotes a fully open social conversation.

If it actually manage to launch a social platform that people use, the opportunity here is significant.

DWAC Shares Pop

On its first day of trading, DWAC shares increased from around $10 to around $45. It shot up massively in after-hours trading before opening on Friday at $131. It traded as high as $160 and is now at $99 as I write this on Friday afternoon. And the share volume is ridiculous with 104 million shares today.

The most surprising thing about it all is that DWAC was priced pretty darn cheaply at the start. The SPAC started trading with a market cap of around $875 million. Of course, early investors got warrants because it’s a SPAC. Warrants give investors the right to buy more stock at the original price ($10 in this case). As of this writing, DWAC is trading at around a $3.5 billion market cap. Let’s double that to make up for warrants, so $7 billion — still not outrageously priced compared to many stocks. Look at AMC for comparison, the movie theater chain meme-stock that’s somehow valued at $20 billion.

DWAC has the potential to be the mother of all meme stocks. There’s a (small) chance TMTG actually builds a great product. If that happens, the platform would have the potential to compete for around 40% of Facebook’s users. And the returns in that scenario would be significant.

Of course, there’s a larger chance that TMTG fails long-term. And DWAC stock could crash at any time. Brokers could even pull the ability to buy shares, like Robinhood did with GameStop. 

The Beginning of Big Tech’s End

No matter what happens with TMTG, I think this is the beginning of a recurring theme. Rebellious, free-speech-promoting social startups that may eventually take down big tech. And many of them will be built using decentralized/crypto-based technology.  

It’s not too likely that Trump’s firm takes down big tech. But what are the chances that somebody else does? I’d say they’re very high over the next few years.

Opportunities to invest relatively early in such a social platform are pretty rare. But I think it’s the exact kind of opportunity that early investors should be on the lookout for.

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