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DWAC, Trump media SPAC, hit by SEC inquiry. Nunes to helm TRUTH

Written By | Dec 7, 2021
Trump Media SPAC, DWAC, Devin Nunes, Trump related SPAC spec

Miss me yet? President Donald J. Trump at Jan. 6th rally in D.C. C-SPAN screen capture.

WASHINGTON – The social media competition plot thickens. Donald Trump continues to move full speed ahead on making his new social media / etc. company TMTG’s debut in Q1 2022. He’s also surprised investors by announcing the appointment of his new company’s CEO: None other than Devin Nunes (R-CA). But unsurprisignly, on Monday, media reports revealed that DWAC, the SPAC company currently designated as Trump’s vehicle for going public with his media entity, was being “investigated” by the SEC.

Undoubtedly, Senator Pocahontas (CCP: MA), who’s consistently agitated for just such investigations involving anything Trump, will step up to claim credit for this activity. But the SEC revealed it had begun an essentially routine inquiry into the Trump media SPAC deal earlier in November. Before Pocahontas urged the inquiry. Suspicious.

Are the Feds “investigating” Trump again?

ZeroHedge explains the details thus far.

“Apparently, the SPAC’s surging valuation … caught the eye of authorities, which is why DWAC was forced to announce Monday that it is cooperating with the SEC, sending its shares sputtering lower…




“In an 8-k filing, the company revealed that it has received notifications from both FINRA and the SEC demanding documents. The company insists it’s cooperating.”

Crazy trading in Trump media SPAC

Having faltered in recent trading action, DWAC has dropped like a rock recently. It’s still down a good 60 points or so from its initial upward spike. From a single digit level, DWAC rocketed past $100 per share when the Trump SPAC deal was announced earlier this quarter. But the air’s been leaking out of its metaphorical tires recently, likely due in part to anti-Trump short-selling.

DWAC shares got hit again late last week, bottoming in the mid-$30-per share range before bouncing a bit. They started recovering further Monday morning on renewed investor optimism. But that was before the SEC headlines conveniently materialized, causing another swoon that dropped the stock toward $40 per share before the shares stabilized again a bit higher.

Enter Devin Nunes

The Devin Nunes announcement promptly juiced the Trump media SPAC shares again Tuesday morning. As of 1 p.m. ET, DWAC is up $4.50 per share, currently hovering around $48.40 as we put this article together.

Nunes plans to leave his House seat in January to helm the budding Trump media empire. Having been gerrymandered out of his safe California seat for Election 2022 by that state’s “nonpartisan” district-setting commission, Nunes apparently had a choice to either move to an adjacent “safe” district and run again, or move on to greener pastures.

After enduring nearly as much persecution by deranged Democrats as Donald Trump in recent years, Nunes likely sensed that time spent running a new private sector media empire dealing with the TRUTH could prove far more rewarding. In more ways than one.

DWAC endorsed by a big PIPE capital raise

What initially got investors excited again about DWAC Monday (before the SEC news hit) was an announcement that the entity had just closed a “PIPE” (Private Investment in Public Equity) deal that raised an additional $1B of capital for the Trump entity. This, for reasons known to accountants but not to me, technically [values] the shell company with Trump’s name on it at $4 billion. Investors see this as an affirmation of the eventual new company’s viability in a year when most other SPAC deals have tanked when they began to trade publicly.

What’s a PIPE anyway?

For those unfamiliar with PIPEs and SPACs, as I admit I was, here’s a useful rundown on this game via Investopedia.

“Private investment in public equity (PIPE) is the buying of shares of publicly traded stock at a price below the current market value (CMV) per share. This buying method is a practice of investment firms, mutual funds, and other large, accredited investors. A traditional PIPE is one in which common or preferred stock is issued at a set price to the investor, while a structured PIPE issues common or preferred shares of convertible debt.

“The purpose of a PIPE is for the issuer of the stock to raise capital for the public company. This financing technique is more efficient than secondary offerings due to fewer regulatory issues with the Securities and Exchange Commission (SEC).”



More about that SEC inquiry

Given the routine political persecution of all things Trump by the Democrats and most Democrat-run entities – as in the entire Federal government – ZeroHedge takes what we regard as a balanced view of this seemingly inevitable interference by the Federal government.

“DWAC has received certain preliminary, fact-finding inquiries from regulatory authorities, with which it is cooperating. Specifically, in late October and in early November 2021, DWAC received a request for information from FINRA [Financial Industry Regulatory Authority], surrounding events (specifically, a review of trading) that preceded the public announcement of the October 20, 2021 Merger Agreement.”

Is this inquiry good, bad or indifferent?

“According to FINRA’s request, the inquiry should not be construed as an indication that FINRA has determined that any violations of Nasdaq rules or federal securities laws have occurred, nor as a reflection upon the merits of the securities involved or upon any person who effected transactions in such securities.

“Additionally, in early November 2021, DWAC received a voluntary information and document request from the SEC which sought, inter alia, documents relating to meetings of DWAC’s Board of Directors, policies and procedures relating to trading, the identification of banking, telephone, and email addresses, the identities of certain investors, and certain documents and communications between DWAC and TMTG.

“According to the SEC’s request, the investigation does not mean that the SEC has concluded that anyone violated the law or that the SEC has a negative opinion of DWAC or any person, event, or security.”

But here’s ZH’s money graf.

“Both regulators are sniffing around for rule violations, but at least the SEC is being somewhat transparent about the fact that this is a massive fishing expedition. But we can’t help but wonder if they would be as aggressive under a Republican administration?”

We wonder, too.

Full disclosure, re: investing in DWAC:

We’ve been in and out of the fast-trading shares of DWAC over the past month and currently hold a small position. So far, we’ve made some money and lost some money.

This is a “mad money” kind of stock at the moment, and we move in and out of it with money we feel we can afford to risk. We’ve done this mostly in self-directed IRA accounts, because in and out trading that incurs short term losses and subsequent repurchases can trigger “wash sale” rules that essentially disallow losses if you get back into the same or similar shares within a 30-day window.

The rule essentially doesn’t apply in an IRA or 401(k) under most (not all) circumstances. Why? in a normal IRA, whether you win or lose on a trade, Uncle Sam eventually taxes you on money you withdraw anyway. I.e., there’s essentially no advantage in taking a loss on a trade in a retirement account, since you can’t deduct it against ordinary income. At least that’s how I understand it.

Bottom line:

While Trump fans may desire to take a ride on DWAC shares, all traders should understand they travel at their own risk. As always, but perhaps moreso. There’s simply no P&L record at all for this new company, so there’s no way to really evaluate these shares at the moment.

ADDENDUM:

Also just announced: Smaller and freer YouTube competitor Rumble, which currently carries uncensored Trump and those of other You-Tube persecuted video individuals and sites says it’s going public via another SPAC, CF Acquisition Corp. VI (NASDAQ: CFVI).

The deal will likely complete in Q2 2022. Interestingly, a thus far unconfirmed report claims that the Trump media company / site intends to use Rumble software as the basis for one or more of its own online offerings.

The Rumble connection, the Nunes announcement… what a day we had today. And Mr Market even added on to Monday’s sharp rally today.

Stay tuned.

 

Terry Ponick

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Senior Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17