The market has been ready for some time for some information concerning the long run path of TRUTH Social, the social media community began by former President Donald Trump. The launch of the brand new social media platform is now anticipated for February, at which level TRUTH Social might begin to amass thousands and thousands of customers. The community launch could possibly be an enormous catalyst for Digital World Acquisition Corp. (DWAC) and shares have already began to maneuver!
Digital World Acquisition SPAC merger with Trump Media & Know-how Group
Solely three months in the past, Digital World Acquisition Corp. stated that it’ll merge with Trump Media & Know-how Group in a bid to convey the previous President’s personal social media community to fruit. The previous President was banned from utilizing his earlier social media accounts in January 2021. Donald Trump had near 150M followers throughout numerous social media platforms earlier than the January 6, 2021, riot on the U.S. Capitol. Extra exactly, the previous President had 89M followers on Twitter, 33M on Fb and 25M on Instagram.
Digital World Acquisition Corp. is the particular function acquisition firm that the previous President is utilizing to launch his personal media firm. The SPAC deal initially positioned an 875M enterprise worth on the social media firm. PIPE traders and TMTG stockholders will personal the vast majority of the corporate as soon as the merger closes. The variety of complete shares, not together with earn-outs, is about 225M. The earn-out construction contains as much as $40M extra shares and the overall enterprise worth, primarily based on earn-outs, might rise as much as $12B.
The value of Digital World Acquisition Corp. soared from $10 earlier than the merger announcement to a peak of $175 shortly thereafter. Because the finish of October, nevertheless, shares of Digital World Acquisition Corp. have been shedding floor, however appear to have discovered some assist round $50. Within the final week, shares of Digital World Acquisition Corp. began a brand new upleg on expectations that the Reality Social community might be launched in February.
Close to-term catalyst
The launch of former President’s new social media community is all however assured to attract in a major variety of followers. Based on info out there on the App retailer, the TRUTH Social app might be prepared for launch on iOS on February 21. Screenshots of the app present the brand new platform may have options just like these on Twitter, with customers with the ability to seek for information, touch upon tales, ship messages and share content material with followers.
The launch of TRUTH Social is an enormous deal for Trump Media & Know-how Group and it’s a doubtlessly important near-term catalyst for shares of Digital World Acquisition Corp. as a result of platform progress could be anticipated to speed up significantly after the app turns into out there. I estimate that TRUTH Social might amass a person base of 100M by the point the subsequent presidential election rolls round in 2024 and we could be witnessing the start of a serious media know-how firm that’s going to make life a complete lot tougher for rival platforms.
TRUTH Social might crush expectations in February concerning person progress and buyer uptake of TMTG+, a paid subscription provide of the community. Particulars of the subscription provide haven’t but been revealed however TMTG+ is more likely to provide a greater expertise than the free ad-supported model of TRUTH Social. Assuming a ten% sign-up charge for TMTG+, which isn’t unreasonable contemplating the excessive engagement the previous President attracts, TRUTH Social might develop a 10M-strong subscriber base comparatively shortly that generates between $100M and $200M in month-to-month revenues (assuming a month-to-month subscription worth starting from $10 to $20).
Based on projections from Trump Media & Know-how Group, the community estimates that it will probably lure 16M customers to its platform within the first yr of operations. The share of monetizable customers is predicted to achieve simply 5% which calculates to 0.8M paying customers. Nevertheless, the variety of monetizable customers and common income per person is projected to ramp up shortly… and the presidential election in 2024 could possibly be an accelerant for TRUTH Social’s income and person progress. I imagine TRUTH Social will see an unprecedented rush of person sign-ups in February and can develop considerably quicker than anticipated till 2024.
Upside in market valuation
Since TRUTH Social has not launched but, a whole lot of guess work is concerned as to how shortly the community might develop and what buyer uptake charges for TMTG+ might be. Assuming $1.2B in annual revenues by 2024 within the low-case and $2.4B within the high-case, Digital World Acquisition Corp. seems to be materially undervalued earlier than the launch of TRUTH Social. The particular function acquisition firm presently has a market worth of $2.0B, implying a P-S ratio of 0.8 X (high-case income estimate) and 1.7 X (low-case income estimate).
Dangers with Trump Media & Know-how Group
It’s a little bit of a threat to leap into DWAC earlier than the TRUTH Social community launches in February as a result of there isn’t a assurance that the platform will work as meant. There’s additionally no assurance that person progress might be as sturdy as I imagine it is going to be. A sluggish begin concerning person sign-ups might impression the perceived worth of the TRUTH Social platform and the share worth of DWAC in a detrimental manner. If, nevertheless, the pace of person sign-ups is powerful and the community features traction with customers shortly, DWAC might revalue materially greater.
The upcoming launch of TRUTH Social in February might put Digital World Acquisition Corp. into one other valuation class. I anticipate a surge of buyer sign-ups for the brand new social media community and it might act as a large near-term catalyst for the share worth of DWAC.