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The latest meme stock in the Trump SPAC wave: Phunware

October 22, 2021, 5:15 PM UTC

Well isn’t this PHUN?

By noon on Friday, Nasdaq had paused trading 13 times in Digital World Acquisition Corp., a special purpose acquisition company, on the news that it intended to merge with Donald Trump’s planned social media startup, Truth Social, and take it public.

That massive interest in the Trump SPAC also created a flurry of trades of a penny stock with ties to the Trump reelection campaign, Phunware. The day of the announcement, nearly 106 million Phunware shares exchanged hands, up from little more than 3 million the day prior, according to S&P Global Market Intelligence. Phunware’s market cap, which was valued at $116 million at market close on Thursday, soared to $1.5 billion at one point on Friday, when shares peaked at $19.39 per share. They have since fallen to around $10 by early afternoon.

There doesn’t seem to be any particular reason why Phunware shares have soared alongside Digital World, apart from the company’s role in Trump’s reelection campaign: Phunware was responsible for building the app Trump used to communicate with and track 2.8 million of his supporters. There have been no announcements of a partnership, and a Phunware spokesperson did not respond to an immediate request for comment. Phunware announced it would acquire computer systems provider Lyte Technology the morning of Oct. 19, but the stock didn’t budge that day.

The company itself typically trades around $1 or $2 since 2019 and has a financially troubled past, including having to pay Uber $4.5 million over allegedly fraudulent advertising claims. It has reportedly struggled to maintain employees, investors, and clients, according to the Associated Press.

But now volatility in Phunware shares is off the charts—enough to trigger Nasdaq to halt trading in the penny stock eight times before noon on Friday. All of these halts were due to what’s called a “LULD pause,” which is a five-minute trading pause that goes into effect if the price of an equity moves too far up or down from its average reference price from the preceding five minutes. The pause is part of a Nasdaq rule that is meant “to address extraordinary market volatility in U.S. equity markets.”

Of course, investments in Digital World Acquisition appear to be quite speculative as well at this point, as the company hasn’t yet released any kind of formal financial figures or information. Truth Social launched in beta this week and has already suffered from hacking attempts. It is unclear whether the company’s purported $1.7 billion valuation from its press release was determined by an outside investor or the company itself, writes Fortune’s Lucinda Shen. Digital World has surpassed that valuation on the public exchange—reaching a $3.2 billion market cap on Friday.

The Securities and Exchange Commission would still need to approve the merger once Digital World files the appropriate disclosures, as would shareholders. Securing enough votes has been difficult for some companies that achieved meme-like stock status in the past.

But as for now, shares of Digital World—and penny stock Phunware—are exchanging hands fast, with spurts of five-minute trading halts as they soar.

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