Shares in Digital World Acquisition Corp. (DWAC) experienced a significant drop of more than 12% on Friday morning as the company's shareholders voted in favor of a merger with a social media company owned by former President Donald Trump. The stock, which opened at $44.20 per share, plummeted to below $38 at certain points following the decisive vote.

By noon Eastern Time, DWAC shares were down approximately 3.5% from the opening price, reflecting investor concerns about the merger's implications for the future performance of the company. The approval of the merger paves the way for the formation of a newly merged entity known as Trump Media, set to begin trading under the new ticker symbol DJT next week.

With a controlling interest in the new company, estimated to be worth over $3 billion, Trump's majority shareholding would be subject to the value of DWAC shares, which need to recover before the merger's completion for Trump to fully capitalize on his investment. However, the presence of short-sellers in the market adds an additional layer of uncertainty to the stock's performance.

According to FactSet data, approximately 11% of the tradable DWAC shares have been sold short. Short-selling involves investors betting on the decline in a stock's price in order to buy back shares at a lower price and repay the entities that initially lent them the stock. This indicates that some investors expect a further decrease in DWAC's value, potentially dampening Trump's future gains.

The approval of the merger between DWAC and Trump's social media company marks another significant development in the former president's pursuit to establish a strong online presence, following his ban from major social media platforms earlier this year. The creation of Trump Media aims to provide a new platform for conservative voices and facilitate direct communication with his supporters.

As investors continue to evaluate the implications of the merger, the upcoming days will be crucial in determining the trajectory of DWAC shares. Whether the stock can recover its losses and regain investor confidence remains uncertain, especially with the presence of short-sellers and the broader market sentiment towards Trump's involvement.

The merger's completion and the subsequent trading of Trump Media under the DJT ticker symbol will undoubtedly attract significant attention. Investors, analysts, and the public will closely monitor the performance of the new company, as it seeks to navigate the swiftly changing landscape of social media and forge its place in the digital world.

Disclaimer: This article is for informational purposes only and should not be interpreted as financial advice. Trading stocks involves risks, and readers should conduct their own research and consult with a professional financial advisor before making investment decisions.