Regulators asking questions on plans for Trump venture
NEW YORK — Regulators are looking into the deal that would bring Donald Trump’s new social media company to the stock market, one that has attracted both legions of fans of the former president and people looking to make a quick profit.
The company partnering with Trump Media & Technology Group acknowledged the inquiries in a filing it made with regulators on Monday. It also gave some financial forecasts for the company, which wants to rival Twitter and other platforms that banned Trump after the Jan. 6 Capitol riots, along with Netflix and other streaming video services. It said over the weekend that it’s lined up $1 billion in investments from a group of unnamed institutional investors.
Separately, Trump Media announced that Rep. Devin Nunes, a Republican from California, will leave Congress to become the company’s chief executive officer in January. Nunes, the former chairman of the House Intelligence Committee, was an ardent backer of Trump’s during probes into Russian interference in the 2016 election and the president’s 2019 impeachment by the Democratic-led House.
The regulatory scrutiny is focused on the October announcement by Trump’s media venture that it would merge with Digital World Acquisition Corp. That company had launched on the U.S. stock market three weeks earlier with the sole purpose of finding a privately held company to buy.
Digital World said Monday that it is cooperating with “the preliminary, fact-finding inquiries” by the Securities and Exchange Commission and the Financial Industry Regulatory Authority.
The SEC early last month requested documents related to meetings of Digital World’s board and communications between Digital World and Trump’s media venture, among other things. According to Digital World, the SEC’s request said the commission’s “investigation does not mean that the SEC has concluded that anyone violated the law or that the SEC has a negative opinion of DWAC or any person, event, or security.”
The SEC could be looking at whether Digital World and Trump’s company had any conversations about a deal before Digital World’s own initial public offering of stock, said Jay Ritter, a professor at the University of Florida who is an expert on initial public offerings.
Under rules for these blank-check companies, known as special-purpose acquisition companies, they’re not supposed to line up acquisition targets before selling their own shares. Senator Elizabeth Warren on Nov. 17 wrote a letter to the SEC’s chairman, Gary Gensler, asking if the agency is exploring whether Digital World had violated the law by holding such discussions and misleading potential investors by failing to inform them before its IPO.
Just what the regulators are investigating is not clear. What’s more, the regulatory rules on special-purpose acquisition companies’ discussions with targets are gray, prohibiting only “substantive” talks with possible acquisition targets.
Blank-check companies typically buy businesses with employees, customers and a track record, which is not the case with the Trump deal. Several experts on such deals also said the three weeks it took for Digital World to find and strike a deal with Trump Media & Technology Group was unusually fast.