DWAC’s SPAC Madness

Just when you thought you’d seen it all this year. 😅 Donald Trump’s new media company, Trump Media & Technology Group, is merging with Digital World Acquisition Corp. $DWAC skyrocketed over 350% today on news of the merger.

Prior to the merger announcement, $DWAC shares traded around $10/share. Last night, the SPAC announced its plans to merge with TMTG. The stock exploded to $45 today, up over 356%. Trading was halted several times due to volatility — yeah, that’s like a GameStop-level price explosion. 🚀 🚀

Digital World Acquisition Corp announced that it will be taking Trump Media & Technology Group public today at a $1.7 billion valuation. The SPAC’s sponsors commented this on the deal:

“The transaction values Trump Media & Technology Group at an initial enterprise value of $875 Million, with a potential additional earnout of $825 Million in additional shares (at the valuation they are granted) for a cumulative valuation of up to $1.7 Billion depending on the performance of the stock price post-business combination. Trump Media & Technology Group’s growth plans initially will be funded by DWAC’s cash in trust of $293 Million (assuming no redemptions).”

After a dramatic day in the markets, Trump Media & Technology now sits at an estimated $2.2 billion valuation. The company intends to challenge popular social media platforms and streaming services like Twitter, Amazon, Netflix, and Disney+. The new platform will be called Truth Social.

Everyone knows Former President Donald Trump has been banned on popular social media sites, including Twitter and Facebook. So this is certainly a story we’ll be watching. ⏳ 

Snap posted its latest quarter’s earnings today and needless to say, it could’ve gone better. 🤦 Over $25 billion of the company’s value was wiped out in the minutes after its earnings release dropped. 

The company posted EPS of $0.17 (analysts expected $0.08) and revenue of $1.07 billion (analysts expected $1.10 billion.) The company’s quarterly revenues were up 57% YoY. The company’s daily active users also grew, up 23% YoY.

Besides the small miss on revenue, this earnings report was acceptable… until investors scrolled down to the part detailing guidance for future quarters. That’s where everything went south. 💀

The company said that it expects Q4 revenue to be between $1.16 billion and $1.2 billion. Those figures represent pitiful growth compared to recent quarters. Snap CEO Evan Spiegel faulted Apple’s new privacy changes for the lost revenue, indicating that it made it “more difficult for .. advertising partners to measure and manage their ad campaigns for iOS.”

The fears about Apple’s new privacy changes boiled over to other social media companies like Facebook (-5%) and Twitter(-5%), which fell in sympathy with Snap on the news.

Before today, Snap traded at 200x earnings for FY 2021. Given those astronomical multiples, the small revenue miss and unfortunate outlook added up to one big loss for the company. 💩

$SNAP fell 21% in AH. Spooky. 🎃

Google announced today that it would halve fees on sales made in its app store. The change will reduce the Google Play store’s service fee from 30% to 15% on Jan. 1, 2022. The company also indicated that it would introduce a program to unlock even lower fees for media apps.

The cut had meaningful effects on subscription-oriented tech businesses today like Roblox (+5.8%), Duolingo (+12.8%), and Spotify (+1.5%). Dating apps, like Bumble (+7.4%) and Match Group (+10.2%), also enjoyed the benefits of reduced fees. ❤️ All of these businesses rely on Apple and Google’s respective app stores to sell subscriptions and make microtransactions.

It might be a sign of the way that things are going — lower fees now are meant to appease regulators and lawmakers which have brought lawsuits against Google and Apple, alleging that their app store fees constitute antitrust violations. However, reducing fees might not be enough for the companies.

A ruling made by a judge in Sept. 2021 opened up the floodgates for app developers to use payment competitors like Stripe, PayPal, and Square in lieu of the tech giants’ app store payment system.

$GOOG was mostly unaffected by the decision. It traded up just 8 bips in regular trading today.

Three airlines reported earnings today, offering a glimpse into the state of the airline biz. American Airlines, Southwest Airlines, and Alaska Air have the government’s Payroll Support Program (PSP) to thank for their profits, EPS, and revenue beats. ✈️

Southwest boasted the greatest net income of the bunch, generating $446 million (or diluted EPS of $0.73/share) on $4.7 billion in revenue. $LUV was down 1.6% today.

American reported $169 million in net income (or diluted EPS of $0.25/share) on $8.97 billion in revenue. $AAL was up 1.9% today.

Finally, Alaska posted $194 million in net income (or diluted EPS of $1.53/share) on $1.95 billion in revenue. $ALK was down 1.8% today.

The figures represent significant improvements QoQ and YoY for the airlines. It also goes a long way of supporting the ongoing recovery of the broader travel industry. However, they’re not back to their pre-pandemic glory just yet. Nearly every airline still relies on the government’s PSP while clawing back operating revenue and load factor (or the “fullness of the aircraft.”)

In Q3 2021, Southwest’s load factor was 81%. Alaska wasn’t far behind, at 80%. American booked a 78% load factor. For comparison though, most airlines posted load factors just shy of 50% in Q3 2020.

As you’d expect, all the airlines expect marginally higher load factor in Q4 2021, but they’ll be facing down the barrel of higher oil prices, labor shortages, and fears of another COVID surge. 👎

The US Global Jets ETF ($JETS) traded -0.08% today.