Betting short against SPAC's merger with Donald Trump's company has shown that the former US president's social media site could work.
Arno Wagner, director of sales reduction at Iceberg Research, said the Truth Social platform could compete with the likes of Twitter, but he was unsure how profitable it would be.
"Everyone knows that the fixed costs of social media are very high," Wagner told Insider. "So they really need a lot of traffic to absorb. It's not easy to be Facebook or Twitter."
On Monday, Iceberg Research announced its short position in shares of Digital World Acquisition Corp. , a company that is merging with Trump Media & Technology Group.
The short seller said the former president has the leverage to renegotiate terms for much of the company , given that the stock has risen sharply since the merger was announced.
"The key thing is that the higher the share price, the more likely Trump won't leave money on the table," Wagner told Insider.
DWAC shares rose to $157 last week after the announcement, partly due to retailers pouring into the stock.
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"Everything was really priced at a very high price, and for me that's when the risk came in," said Wagner, whose firm has also been outspoken about its short position in AMC, which is popular with retail customers.
The stock lost some of its gains after the triple digits . It closed at $59.07 in New York on Tuesday.
But Wagner said DWAC shares 'still have room to go down'. He added that Iceberg Research does not intend to keep its short position for very long, but declined to go into detail about the timing. However, he said he wanted to "get going" before the company would undoubtedly be "very aggressively" promoting the site on social media.
"Of course, if you're an avid Republican, a Trump fan, you will try this service," he said. "But if you're surrounded by people who hold the same opinion as you, I wonder, do you want to spend time on social media? I don't know."
Representatives for Trump Media & Technology Group and Digital World Acquisition Corp. did not respond to insider requests for comment on Iceberg Research's short position.
