Donald Trump is now more likely than ever to make a Wall Street comeback — and that has escalated the meme-trading frenzy surrounding the former president.
Shareholders of Trump Media, the parent company of Trump’s social media platform, Truth Social, voted Friday to approve a merger with Digital World Acquisition Corp, a blank-check company whose purpose is to raise funds for private companies and take them public.
In anticipation of its merger with Trump Media, shares of DWAC popped more than 100% this year. Trading has embodied the same kind of frenzy shown in Tupperware’s stock surge last July, or that of meme stocks AMC Entertainment and GameStop during the height of the pandemic.
Trump Media saw a $26 million loss during the third quarter of last year, and many experts are questioning whether it is a solid bet — or dramatically overvalued.
“The stock price is clearly a bubble,” Yale law professor Jonathan Macey told CNN. “No rational investor would take the stock at face value, especially if they had to hold it for any length of time.”
Shares of DWAC declined 13.7% on Friday.
DWAC and Trump Media did not immediately respond to CNN’s request for comment.
What is a meme stock?
Meme stocks are characterized by a cult online following and jaw-dropping swings in their price. The first meme stock was GameStop. Investors on Reddit and other social media sites in 2021 decided to bid up shares of the struggling stock to punish hedge funds and institutional firms who hoped to turn a profit from short-selling GameStop’s stock. Short-selling involves borrowing the shares, selling them and buying them back, ideally at a lower price, before returning them and pocketing any profit.
On Truth Social, there are more than 8,000 members in a chat group titled “The DWAC Shareholder Group,” where users discuss the vote and post memes and supportive messages.
A list of rules pinned to the top of the chat forbids members from promoting short-selling, and urges users to provide evidence such as public filings when posting their opinions or recommendations on the new company, which would trade as Trump Media & Technology Group.
“We don’t want to be accused of stock pumping or misleading investors,” one rule notes.
Separately, Trump faces an upcoming Monday deadline to secure a $464 million bond in a civil fraud case against him. The New York attorney general’s office could seize his golf course and private estate north of Manhattan, or other assets, if he can’t pay up.
That means that Trump is strapped for cash. If the merger is approved, it would give him a dominant stake in his firm with shares worth more than $3 billion dollars. But it’s unlikely to solve his cash crunch: Key shareholders of Trump Media, including its management team, have agreed not to sell their common stock for six months to maintain “important stability to the leadership and governance” of the company, according to SEC filings.
CNN’s Matt Egan contributed to this report.
