Weekly Newsletter- Week of 10.24.2021
Trump Taking Media Company Public
This week we learned former President Donald Trump had made plans to take his medical company public via SPAC, or special purpose acquisition company. Digital World Acquisition Corp (DWAC) will be joining together through a merger to help Donald Trump launch his very own social media platform. Trump was previously banned from both Twitter and Facebook in response to the unfortunate events that took place at the U.S. Capitol earlier this year. Ever since then, Trump has been exploring opportunities to form his own media company. Not only do we now know the company that he will be launching, but we also know his plans to make the media entity a publicly traded company.
SPACs
SPACs are blank check companies that look to take another company through an acquisition or a merger. Investors generally have little to no insight into what private company the SPAC is targeting for a merger. SPACs provide additional funding that allows the private entity to go public through the newly formed joint venture. As we’ve noted in the past, businesses may choose to go public via SPAC instead of an IPO as SPACs are seen as a quicker and easier process for going public. SPACs have become an increasingly popular method for taking a company public. We’ve seen the number of SPACs skyrocket in the last two years. For more information on SPACs and why they’re used, please read our blog on SPACs titled What are SPACs & Why are they so Popular?
DWAC Soars
Shares skyrocketed after the announcement as DWAC has become exceedingly popular for retail traders- the ticker was one of the most mentioned on WallStreetBets this week. Trading volume was so high, the trading of DWAC shares was halted several times on Thursday and Friday. We’ve seen this happen on occasion throughout the pandemic when the share prices of a company are viewed as “too volatile”. This usually happens when a share price makes rapid price fluctuations in just a short amount of time. DWAC stock price jumped another 100% on Friday, bringing the weekly gains to over 800%! Before the news regarding Trump Media was reported, DWAC shares traded for about $10 a week ago. Shares closed over $94 on Friday.
Trump Media and Technology Group
This yet-to-be-launched company was formed to quote “Fight liberal media and battle big tech.” Truth Speech, as it’s been dubbed, hopes to implement “open, free, and honest global conversations”.
PayPal Looks to Acquire Pinterest
In more breaking news, we learned about PayPal’s plans to acquire growing social media platform Pinterest. As more and more big technology companies look to join the crowded FinTech space, it’s no surprise PayPal is looking to expand its eCommerce presence. At a deal worth an estimated $45B, Pinterest stock popped big on the news, jumping nearly 20% in one day. The stock has since cooled off while PayPal’s stock has been trading down by over 10% this week.
What’s in it for PayPal?
While still considered rather niche, Pinterest has become a major destination for people seeking ideas for their home, their wardrobe, and everything in between. Pinterest predominately generates revenue through digital ads, they’ve been growing as an eCommerce platform. PayPal has openly discussed their desire to bring more direct purchases to their platform. If PayPal can help Pinterest grow into a shopping destination, PYPL could make nearly 3% on all transactions. Additionally, PayPal may also look to encourage its advertisers to spend ad dollars with Pinterest. This deal stands to be PayPal’s largest acquisition ever.
Super App
As PayPal continues to expand its services, the term ‘super app’ continues to be thrown around. PayPal is looking to keep its users engaged on the platform for even longer as they continuously expand their services. PYPL estimates their user base will grow to 750M people by 2025- they currently have just over 400 million users. By acquiring Pinterest, PayPal is looking to enhance its engagement between consumers and merchants with PayPal being the central facilitator in the commerce journey. Buying Pinterest would now put PYPL as direct competitors to Facebook and Instagram.