- Two stocks linked to Donald Trump dropped shortly after the ex-president detailed plans for one of the companies, and the other firm said it would sell additional shares to raise capital.
- The big pullbacks for the SPAC Digital World Acquisition Corp., and Phunware came after both companies saw massive gains in their stock values last week.
- DWAC, which is a special purpose acquisition company, plans to merge with the new social media company Trump Media & Technology Group.
- Trump's plans for a social media app come months after he was banned by Twitter and Facebook for inciting the deadly Jan. 6 Capitol riot by his supporters.
The big pullbacks in the prices of the SPAC Digital World Acquisition Corp., and Phunware — which follows similar drops for both names Monday — came after the companies saw massive gains in their stock values last week.
DWAC's share price skidded nearly 30% Tuesday to close at $59.07 apiece. And tiny advertising software start-up Phunware tanked almost 40% to $4.35.
DWAC, which is a special purpose acquisition company, last week said it would merge with Trump's planned new social media company the Trump Media & Technology Group, with the resultant firm's shares being publicly traded.
That set off a frenzy of buying in DWAC shares over two days last week, which left the stock price more than 800% higher.
Phunware, which is not connected to DWAC's merger, also saw a major gain in share price, likely because of the firm's involvement in Trump's failed 2020 reelection campaign.
On Tuesday, an hour before trading began, Trump issued a lengthy statement about his plans for the new social media app he intends to roll out and other aspects of his new company.
"To take on Big Tech censorship, we are creating a 'Big Tent' platform: Truth Social," Trump said. "We are inviting people of all political stripes, and all different viewpoints, to come and participate once again in the great American debate. That's what our country is supposed to be about."
"Unlike with the Big Tech platforms, there will be no shadow-banning, throttling, demonetizing, or messing with algorithms for political manipulation," he added. "We will not be treating users like lab rats for social experiments, or labeling alternative views as 'disinformation.'"
Trump also said the new company will launch an on-demand video streaming service "that competes with the increasingly 'woke' and politicized 'entertainment' programming created by Big Tech and Big Media players," and sees "opportunities to create 'cancel-proof' alternatives in other key areas ranging from web services to payment processing."
However, Trump has a long history of overpromising on new businesses and those ventures failing. Among his biggest busts were several casinos in Atlantic City, New Jersey, Trump Airlines, Trump University, a Trump mortgage company and Trump steaks.
Trump's plans for a social media app come months after he was banned by Twitter and Facebook for inciting the deadly Jan. 6 Capitol riot by his supporters.
Also Tuesday, Phunware said it will sell up to 5.6 million additional shares "at the market offering," which would bring its total stock outstanding to nearly 90 million, the company said in a regulatory filing Tuesday.
The offering would raise up to $48.54 million for Phunware based on a price of $8.74 per share —more than $4 more than the level that the stock was trading at early Tuesday.
In a filing with the Securities and Exchange Commission on Tuesday announcing the offering, Phunware said, "The trading price of our Common Stock has recently increased significantly, possibly due to recent revenue guidance, our acquisition of Lyte Technology Inc. and/or speculation regarding our ties to the Trump re-election campaign."
Before last week's explosive rally, the stock was trading around 90 cents apiece.
Despite the plunge in DWAC's price, the stock is still trading around $60 per share, six times higher than the SPAC IPO price of $10.
DWAC also was still being heatedly debated on Reddit's WallStreetBets chatroom on Tuesday with the ticker among the top five most popular mentions on the platform, according to alternative data provider Quiver Quantitative.
One of the most commented-on posts Tuesday said, "how are my $DWAC bag holders doing?"