• The SPAC stock linked to Donald Trump's planned social media platform dropped in price after booking huge gains following news that it would merge with his social media company.
• Digital World Acquisition Corp. stock fell double digits, days after two hedge funds sold their stakes.
• Trump is banned by Twitter and Facebook for inciting the Jan. 6 Capitol riot.

The SPAC stock linked to Donald Trump's planned social media platform sharply dropped in price Monday after booking huge gains last week following news that it would merge with the ex-president's planned social media company.

Digital World Acquisition Corp. stock fell 11% to close at $83.86 per share.

That pace was a major change from last week, when DWAC shares skyrocketed from $9.96 apiece at Wednesday's close to $94.20 per share Friday — a whopping 845% rally in two days.

The so-called special purpose acquisition company also was seeing markedly lower trading volume Monday. More than 64 million shares of DWAC changed hands, according to FactSet.

Last Thursday, with its price soared more than 350% in a single session, nearly 500 million shares of DWAC were traded. DWAC that day was the most traded name on the consolidated tape of New York Stock Exchange and Nasdaq listings, by far.

In another sign that the Trump-fueled craze had died down, or at least moderated a bit, the share price of the advertising software start-up Phunware tumbled 18% on Monday.

Phunware, which was involved with Trump's 2020 reelection campaign, saw a 470% surge in price on Friday.

There is no indication that DWAC and Phunware have a business relationship. But Phunware's rise last week coincided with the spike in the SPAC's stock.

Short-seller Iceberg Research unveiled a bearish position on the DWAC on Monday, saying that investors face uncertainties in this blank-check deal as Trump could become a dominant shareholder after the merger.

"Now that initial excitement has passed, we see only risks for investors in near future. Based on Trump's track record, at current price, renegotiation is likely to keep more of the merged company for him," Iceberg Research said in a tweet.

"SPAC holders don't own a piece of this project yet. Trump has leverage, not them."

DWAC remained a popular chatroom topic among retail traders, who were credited last week with turning the SPAC into the latest hot "meme" stock in 2021.

The DWAC ticker was the second-most popular name on Reddit's WallStreetBets chatroom on Monday, after Tesla, the electric-vehicle giant that hit a $1 trillion market capitalization on the same day, according to alternative data provider Quiver Quantitative.

One trending post on WallStreetBets on Monday said "DWAC- ALL IN," which attracted more than 500 comments.

SPACs, also known as blank-check companies, are created to raise capital in the public equities markets, with the goal of using the cash to purchase or merge with private firms.

Trump's new social media company, Trump Media & Technology Group, on Wednesday said it and DWAC had reached an agreement to merge so that the former president's firm will become a publicly listed company.

Trump said his yet-to-be-launched "TRUTH Social" platform will "stand up to the tyranny of Big Tech."

Before last week's announcement, Trump had been months overdue on his promise of launching a would-be competitor to social media giants Twitter and Facebook, both of which banned him for inciting the Jan. 6 Capitol riot by his supporters.

Trump remains controversial, even among hedge funds that would have benefited from the sharp rise in DWAC's stock price.

Last week, at least two hedge funds that were among DWAC's biggest investors — Lighthouse Investment Partners and Saba Capital Management — dumped shares in the SPAC after learning of its plans to merge with Trump's company.

"Many investors are grappling with hard questions about how to incorporate their values into their work. For us, this was not a close call," Saba Capital founder Boaz Weinstein wrote in an email statement cited by Bloomberg.