Trump new media deal draws SEC attention to company involved

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The United States Securities and Exchange Commission is investigating one of the companies involved in the case recently announced by former President Donald Trump social media agreement, according to documents released on Monday.

Trump has touted the launch of his new media operation as a way to counter large social media companies that banned him from their platforms after the Jan.6 attack on the U.S. Capitol.

Digital World Acquisition Corp., known as DWAC, is the special acquisition company merging with Trump Media & Technology Group, known as TMTG, for its new social media platform. DWAC disclosed the investigation on a public record with the SEC.

“The DWAC has received some preliminary requests for information from regulatory authorities, with which it is cooperating,” the file said.

These included an SEC investigation in early November.

“DWAC received a voluntary request for information and documents from the SEC seeking, among other things, documents relating to DWAC board meetings, trading policies and procedures, address identification banking, telephone and electronic, with the identity of certain investors, and certain documents and communications between DWAC and TMTG ”, indicates the file.

He added that, “According to the SEC’s request, the investigation does not mean that the SEC has concluded that someone has broken the law or that the SEC has a negative opinion of DWAC or any person, event or security. . “

An SEC spokesperson declined to comment.

DWAC also received requests for information from the Financial Industry Regulatory Authority, or FINRA, in late October and early November “surrounding events (in particular, a trading review) leading up to the public announcement of the deal. merger of October 20, 2021 ”, according to his file. .

The file said the regulator told the company that “the investigation should not be interpreted as an indication that FINRA has determined that violations of Nasdaq rules or federal securities laws have taken place. , nor as a reflection on the merits of the securities concerned or on any person having carried out transactions on these securities. ”

Neither DWAC nor TMTG immediately responded to a request for comment on the case.

Trump Media & Technology Group announced the deal in a press release on Oct. 20, saying it and DWAC “have entered into a definitive merger agreement, providing for a business combination that will turn Trump Media & Technology Group into a listed on the stock exchange. subject to regulatory and shareholder approval.

Companies advertised in A press release Saturday that he had committed $ 1 billion in pledged capital to Trump’s new social media platform, Truth Social. Trump, who is the chairman of TMTG, said the money “sends an important message to Big Tech that censorship and political discrimination must end. America is ready for Social TRUTH, a platform that will not discriminate on the basis of political ideology. As our balance sheet grows, TMTG will be in a stronger position to fight the tyranny of Big Tech. “

Shares of DWAC – a type of company known as SPAC that is formed purely to raise capital in the public markets to buy private companies – soared after the announcement, climbing more than 1,600% before to calm down.

The SEC expressed interest in PSPCs in April, when a senior official published a statement warning market participants that the agency would review transactions. SEC staff were reviewing the documents filed by these companies and “seeking further information,” the statement said, “so that the public can make informed investment and voting decisions on these transactions.”

Special acquisition vehicles like DWAC are primarily shell companies whose shares are listed on the stock exchange. They raise funds from investors to buy private companies which then go public after the acquisition. The popularity of these businesses and transactions has exploded since last year; they were rare until fairly recently.

One of the reasons the SEC is considering PSPCs is that insiders of shell entities may receive financial incentives when they set them up and are able to reap big gains later when outside investors buy.

In a letter to the sec Last month, after DWAC’s stock price fell from $ 175 to below $ 60, Senator Elizabeth Warren, D-Mass., said the Trump deal “looks suspiciously like a ploy in which” the The salespeople behind it should be fine, even if those who fall in love with their sales pitch get screwed. ‘”

She asked the agency to investigate whether DWAC “may have committed securities violations by holding private and undisclosed discussions about the merger as early as May 2021, while omitting this information” from documents filed with the SEC and public statements.

She noted that DWAC had “indicated in numerous documents filed with the SEC between May 25, 2021 and September 8, 2021 that the organization had “not selected a specific business combination target” and had “not initiated substantive discussions, directly or indirectly, with a business combination objective ”, while The New York Times reported that “the sponsor of PSPC was discussing a deal with former President Trump as early as March 2021”.

SPACS “are required to disclose any direct or indirect conversations with potential target companies. DWAC and Trump Media and Technology Group, however, appear to have brazenly flouted these rules,” Warren wrote.

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