TRUMP JUST STORMED WALL STREET

What's up, grab it's guys here. So, normally I don't make videos like this, and I tend to stay away from anything involving politics. But today we gotta talk about one of the most requested topics of investing that stands to make or lose people a lot of money in the process, and that would be DWAC, otherwise known as the Trump social media stock that's begun to take over the entirety of Wall Street in the last few days.

The stock rallied 1200 percent. Trading was halted 12 times in a single morning from excessive volume. It's consistently been the front page headline of every major news outlet, and now it's gaining momentum on Reddit's Wall Street Bets, with some believing the price could go even higher. So, in an event that some people are now comparing to the previous GameStop short squeeze, let's discuss exactly what's going on, what it is, why it's going up in price so quickly, and what this means for you, whether you're just curious how it works or you're thinking about investing because you too want to make five hundred thousand dollars in a few days like a pan man.

But before we start, number one: I don't get involved in politics, I don't take sides, and I only cover the facts objectively in terms of how it relates to your money. Second, I'm just some guy on YouTube making videos from a half-converted garage, so you shouldn't listen to me, and this isn't financial advice. And third, it would help me tremendously if you Diamond Handed that like button for the YouTube algorithm by making it turn blue or black depending on your settings.

Oh, and by the way, I first covered this story on my newsletter app, The Hungry Bull. So, if you want to hear about these stories before I'm able to post a full-fledged video on them, the link is down below in the description. You'll get to see these types of topics before anybody else, and I would love to have you a part of it. So, thank you guys so much. Now, with that said, let's begin.

Alright, so on the surface, before we go into these mouth-watering details, here's what you need to know. On October 20th, Donald Trump announced that his New Media Company set to rival the largest social media platforms would be merging with the publicly listed stock DWAC in an event that would quite literally break the stock market. The premise for this company is fairly simple, as outlined in a 22-page report on their website: their goal is to create an anti-censorship network to level the playing field of expression and create a community where everyone is welcome.

On page 3, they suggest that such a business can eventually evolve beyond social media and into broadcasting news and other computing services that, if implemented correctly, could be non-cancelable. Although where this begins to take off isn't so much the concept, but instead, the massive news coverage from around the world talking about their latest plans to be the biggest social media network, driving up the price alongside with it.

Now, how this works is really interesting—or at least it is for me because I'm a nerd when it comes to anything related to money. But hopefully, this helps explain why it's gone up so much in price. Now, traditionally, when an established privatized company wants to cash out or raise money, they'll do what's called an IPO, which stands for initial public offering. This is when they partner with an investment bank, they release financial records, they price themselves in line with market value, and then they start trading on Wall Street for everyone to gamble on in the first week.

But in this case, since a fully formed company doesn't exist yet, they're not able to IPO. So instead, they use what's called a Special Purpose Acquisition Company, otherwise known as a SPAC. These are companies that are formed for the sole purpose of acquiring other companies, and in theory, investors buy into this with the belief that the management team is going to turn their investment into a mini fortune. It's really no different from me saying, "Hey, everyone, I'll allow you to give me up to 10 million dollars to invest in my next business. I have no idea what it's going to be yet, but so far I have a pretty good track record, and if you want to take a chance on that, just give me your money.”

The advantage here is that a SPAC only takes a few months to set up, and then once they merge with another company, that other company is instantly publicly traded on the open market for everyone to buy and sell. It's a very smart strategy if used appropriately. And that, of course, then brings us to today. The SPAC DWAC initially starts the buy-in of about ten dollars a share, and from there, they have two years to merge with another company; otherwise, they're required to return all of their capital back to investors.

This is important for me to mention because even though ten dollars is the buy-in price, once it begins trading, the sky is the limit—or in this case, it could be even higher. As written in The Hungry Bull app, within the first day it surged 400 percent. Within the second day, it doubled in price again. Within the third day, it more than tripled, and it's now up 900 higher than when it was first announced on October 20th.

Of course, when anything goes up that much in a short amount of time, Wall Street Bets isn't too far behind. But the ticker symbol DWAC is the most popular mention on the subreddit and is the single most actively traded stock on Fidelity's brokerage platform. Not to mention, with the previous price of 131 dollars a share, the technology company was now valued at four and a half billion dollars—all without a working product, revenue, and financials, but instead, the promise of a free speech social media network.

Now, even though some people might be dismissive in terms of actually executing on these goals, we should talk about both the pros and the cons to give an equal argument to both sides so that we could look objectively in terms of whether or not this is actually worth investing into, based on the facts and the history of previous SPAC IPOs.

To start in terms of the positives, first, whether or not you're for or against the idea, there's a big enough market out there for this platform. It's the same reason why we have Facebook, Twitter, Snapchat, YouTube, TikTok, Discord, Clubhouse, and a variety of other social networks—all with their own unique specialty. And even though I'd like to believe that everyone is always welcome everywhere, there is an element where people tend to surround themselves with others who share the same beliefs.

The second, I think it's no surprise that Donald Trump knows how to get attention from everyone for a new company. I believe all publicity is good publicity, and the more headline attention this gets, the higher the price will inevitably go as more users sign up and buy in out of curiosity for what it might be. Plus, it also starts an upward cycle where the higher the price goes, the more media attention it gets, which causes more people to buy in, causing the price to go even higher, causing more people to cover it, and the process repeats itself.

The third, what's unique about DWAC is that for some people, it represents the fundamental support against censorship. And because of that, some people will buy and hold just to support the message, whether or not the fundamentals are justified. This arguably is the most difficult part to quantify because you can't put a value on a person's conviction to stand behind a message they believe in. And if people buy in without the intention of selling and without the care of making or losing money, then this might continue a lot longer.

The fourth, speaking of fundamentals, even though four and a half billion dollars for a non-existent company seems like a lot, there is big money in creating a social network. For example, Facebook is valued at over 900 billion dollars. YouTube is over 500 billion dollars. TikTok is reportedly valued at over 400 billion dollars. However, even though this could continue going higher, I wouldn't YOLO everything quite yet because there are some downsides that we have to talk about.

First, everything right now is based purely on speculation. We have no idea how they plan to implement these concepts. There's not a working plan for people to use, and so far what you're buying into is the promise of what this could be if everything goes right.

The second, there is a risk of de-platforming like other social networks before it. See, most websites operate under what's called Section 230, which says that a network is not held responsible for what their users say as long as they don't alter, edit, or control what information is being said. However, if a company or a website perceives something to be hateful or harmful to its users, they're allowed to take action, and that's resulted in other social media platforms being removed from search.

The third is a business model; it might be difficult to attract a larger audience and partner with others to continue growing. I'm a firm believer that even if you share a different opinion, it's a smart idea to remain on good terms, never speak poorly about anything else, and leave the door open for business because you never know how you might work with each other in the future.

In this case though, by painting a narrative of us versus them, it becomes that much more difficult to grow across competing services, and as a result, revenue has a strong likelihood of suffering.

To force them, I'm also concerned that given how it's structured, it could wind up being too niche of a platform to justify the valuations people want to give it. For example, one could argue that most social media networks could be used by anybody, regardless of their beliefs, affiliation, or background, anywhere in the world. But I have my doubts that this would be able to attract a wide enough audience as they could have, especially outside the US.

The fifth, unfortunately, there are not the best performances of the previous SPAC IPOs over these last few years. For example, in 2020, SPAC activity reached an all-time high, but that doesn't mean their price followed the same path. Like Pershing Square surged and then immediately fell below their offering price; Multi-Planned Corp is down 35 percent; Churchill Capital down 20 percent; Big Commerce down 35 percent; Agora Inc down 30 percent; Lemonade down 40 year-to-date.

And if we analyze this even further, it gets worse. When Whitecharts analyzed the performance of SPACs in relation to the overall market, they found that the vast majority of them failed to outperform the S&P 500 since 2009. Even though short-term SPAC interest could see some pretty monumental returns after an announcement, once the momentum settles down, so does the price. In fact, it was found that over a hundred SPACs that announced mergers this year have, on average, gained under two percent from the price they traded at when they first listed on the stock exchange.

Another piece of research found that even though the majority of them fail, the ones that do well have two traits in common. First, the larger the deal, the more successful it's likely to be. In this case with DWAC, the deal is only valued at what another person is willing to pay on a low float stock with high volume, suggesting that now it's the retail traders setting an arbitrary value, not the company itself.

And second, it was found that a strong performance also comes with a strong management team, of which has not yet been proven with DWAC. There isn't a track record yet of creating a social platform. It's not exactly clear on what level everyone is involved, and there isn't a concrete plan with how they aim to overtake traditional media.

There's also mention that DWAC's official address is listed as a WeWork office in Miami, while their CFO is a top deputy to the Brazilian president and member of the country's parliament. Lastly, there are new reports that the website source code was actually pulled from the social media platform Mastodon, which requires that all copy websites cite where it's from. As of now, they're preparing for a potential lawsuit, and as they say, "Our AGPL V3 license is very important to me, and that is the sole basis upon which I and other developers are willing to give away our years of work for free."

All of this tied together means that as a startup, there are a lot of risks for the investor, and just to be careful with something as volatile as this.

In short, statistically, when you look at this objectively, it does not have the components of previously successful SPAC IPOs in terms of investing in a financially sound company. But it does have something that many of the others don't, and that would be plenty of free marketing along with traders who want to just support the movement and/or make as much money as fast as possible.

Like I mentioned, everything right now is being fueled by hype, excitement, and euphoria about potentially going up in price even further, whether or not that's actually justified. So, as a gamble, it might potentially pay off, but long term, I just can't see how these valuations would be justified without being mentioned non-stop in the media, which I suppose is possible, or them actually executing on their plan without anything going wrong.

Overall, I think I would treat this just like you would any other social media momentum investment. Don't invest more than you could lose, don't get greedy, and if you're up a life-changing amount of money, don't fear selling. Of course, there are also people who just want to buy and support the cause, but in that case, profits don't matter, and anything I say here is not going to make a difference.

But financially, play it safe, understand that fundamentals could change at a moment's notice, and always destroy the like button for the YouTube algorithm. And again, if you want investment-related news like this on a daily basis before I'm able to make a video on them, feel free to use The Hungry Bull app down below in the description. This is something we've been working on now for almost a year, and I'm really excited to be finally able to talk about it.

So, with that said, you guys, thank you so much for watching. I really appreciate it. As always, make sure to subscribe, hit the notification bell. Also, feel free to add me on Instagram and on my second channel, The Graham Stephan Show. I post there every day in addition to here. So if you want to see a brand new video from me every single day, make sure to add yourself to that. Thank you so much for watching, and until next time.