Two days after an announcement that former President Donald Trump's new social media company reached agreement to obtain $1 billion in committed capital, the federal government's Securities and Exchange Commission (SEC) and another regulator said they were investigating the venture.
The investigations by the SEC and the Financial Industry Regulatory Authority were disclosed in a filing with the SEC by Digital World Acquisition Corp., the special purpose acquisition company (SPAC) on track to merge with Trump Media & Technology Group (TMTG).
Trump stated: “$1 billion sends an important message to Big Tech that censorship and political discrimination must end. America is ready for TRUTH Social, a platform that will not discriminate on the basis of political ideology. As our balance sheet expands, TMTG will be in a stronger position to fight back against the tyranny of Big Tech.”
Last month, Massachusetts Democrat Sen. Elizabeth Warren, asked the SEC to investigate possible securities violations involving the merger.
Warren tweeted on Monday that she was glad the regulators were looking into the deal: “Nobody is above the law — and there may have been serious violations of securities laws during the proposed merger of Digital World Acquisition Corp & Trump’s media company.”
After the deal was announced, The Wall Street Journal and other media outlets reported that Trump met with Digital World Chief Executive Patrick Orlando early this year and before the SPAC had raised money.
"If the meeting is deemed to have represented substantive deal talks, it could violate SEC rules. That is because SPACs aren’t supposed to have a target company identified at the time they initially raise money, analysts say," the Wall Street Journal reported.
Orlando, Chairman and CEO of Digital World Acquisition Corp., commented: “Our focus on delivering public shareholder value drives our decision-making and by accepting these commitments for a strategic infusion of growth capital, we believe the combined company can grow on an incredibly strong foundation. The liquidity that will be provided to the combined company balance sheet, in excess of the up to $293 million (less expenses) that DWAC may provide, should fortify the strategic positioning of TMTG. I am confident that TMTG can effectively deploy this capital to accelerate and strengthen the execution of its business, including by continuing to attract top talent, hire top technology providers, and roll out significant advertising and business development campaigns.”
Shares of the SPAC fell about 3 percent to $43.65 on Monday. They have still roughly quadrupled since the deal was announced, though they are well below an October intraday peak of $175 after individual investors piled into the stock, the Wall Street Journal noted.
The Journal added: "SEC investigations typically focus on whether public companies made accurate disclosures to investors and take months or years to complete. Its civil probes don’t necessarily result in formal allegations of wrongdoing."
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