Is Truth Social stock a buy right now?
Like many special purpose acquisition company (SPAC) deals, the proposed merger of DWAC and the TMTG is complex, which poses a risk to investors who do not understand SPACs. It is possible, however, to make some conjectures about the future of the merger and its stock price movements. Could investing in Truth Social stock be very profitable for long-term investors. Is it the right time for you to buy some shares at this point?
Is it possible to predict the future price of Truth Social?
There are three groups of investors that could influence the future price of Truth Social, it is the current investors, the PIPE investors, and the shareholders of Trump Media.
The current investors with long positions, including the meme players, would like the price to increase as much as possible. Meanwhile, Speculators who have short positions, of course, want the price to fall. Thus, the current buyers and sellers are playing against each other, generating the current stock price.
PIPE shareholders want it to fall during the VWAP period so they will be allocated more shares. It is clear that they want the price during this VWAP period to decline to at least $16.67 to get their maximum share allocation of 100 million shares. The PIPE investors can potentially dump 30 million or more shares on the market during the VWAP period to achieve their goal. Therefore, it seems logical to expect the price to be pushed down during the VWAP period, as close as possible to $16.67.
Post-VWAP period, Trump shareholders and buyers of the stock will want to price to climb after the merger so they can also be allocated more shares.
Donald Trump had a whole meme presidency. It’s not hard to imagine many people buying stock in this company simply for the lulz. However, investors still need to know what the valuation of Truth Social looks like. CNBC recently determined that 97 percent of SPACs that have not yet completed a merger are trading below their initial $10 share price.
Is Truth Social stock undervalued?
The Truth Social stock became a meme after the frantic surge of over 800% in share price in October 2021. However, the future opportunities may suggest that Truth Social is undervalued today.
Donald Trump had about 89 million followers on his Twitter account and over 57 million followers between Facebook and Instagram, his presence on Truth Social could be a driver of early-stage adoption by a large number of new users. The company expects to attract 15 million monetizable users for Truth Social and 10 million subscribers to the TMTG+ platform.
Currently, TMTG has a market cap of $1.11 billion on August 12, 2022. Truth Social is projected to produce average revenue per user (ARPU) of $13.50 by 2026 and has 81 million users over the next four years. For reference, Twitter's current ARPU is $23.76.
There’s no doubt that Trump has a massive fan base. However, there are no concrete methods by which to price stocks. Analysts can be inaccurate with even the steadiest, most established names. So, DWAC stock is even more difficult to put a price on.
Is Truth Social stock a good buy right now?
Truth Social stock is undervalued, but they pose a significant amount of risk. Some will buy into this stock based on their affiliation with the Trump brand alone. But others who don’t like Trump may still buy-in, too. Speculation and “the meme factor” will likely be the driving forces behind DWAC’s share price movements.
The biggest challenge for any social network is scale: if there’s no one posting, then there’s nothing to read, which means fewer readers and less incentive to post. Only time will tell if Truth Social will be the new Twitter, a new Parler, or something different altogether.
Consequently, I urge risk-tolerant investors to buy a relatively small portion of the shares at this point. In general, I don’t recommend your Truth Social stock be greater than 20% of your entire portfolio.
When can I invest in Truth Social?
Trump Media inked its deal with Digital World to go public at a valuation of $875 million, including debt. The transaction should close in the first quarter of 2022 when DWAC investors become shareholders in TMTG. Now, you cannot buy stock directly in Truth Social. However, DWAC is listed on the NASDAQ exchange, which means you can buy the stock from most brokers.
Investors have every reason to believe this launch will be a success. Why? Because Trump already has a built-in user base that continues to demand his posts. So, users will probably flock once the public rollout occurs. That’s great for determining the demand for DWAC stock and Truth Social.
Final thought
Whether or not to invest in DWAC stock is not just a fundamental financial judgment. It’s also an inherently political and social statement. I believe investors should be patient and wait for the de-SPACing process to finish. In the long-term DWAC stock holds plenty of promise.
When investing, it’s important to invest in an entrepreneur and leader who is brilliant and constantly looking into the future. I think Donald Trump is one of the best people to look and plan ahead. I have no doubt Truth Social’s share price will exhibit tremendous volatility over the next several years. However, I’m bullish Truth Social will continue to grow and revolutionize the social media industry.
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