Former President Donald Trump is under way with a social media deal, but now the Securities Exchange Commission and the Financial Industry Regulatory Authority have opened investigations, meaning things could now be stalled for Trump.
Since Jan. 6, when the social media giants banned Trump after the incidents at the Capitol, the former president has been promising the launch of his own media company.
Last week, his social media venture finally announced that it had entered into agreements to raise about $1 billion from a group of investors as it prepares to float in the stock market, Reuters reported.
Digital World Acquisition Corp, a blank-check firm (Special Acquisition Company), said it will provide up to $293 million in a merge with Trump Media & Technology Group. This bumps the proceeds up to just over $1 billion. The acquisition firm will then take TMTG public by listing it in New York.
An additional $1 billion came from private investment in public equity (PIPE), from a diverse group of investors, according to Reuters.
This extra $1 billion supplements the money raised in the initial public offering, DWAC explained to the Hollywood Reporter.
But now, the SEC and FINRA has been stuck on this merger and investigations are underway.
DWAC disclosed the investigation in a public filing with the SEC.
“DWAC has received certain preliminary, fact-finding inquiries from regulatory authorities, with which it is cooperating,” the filing said.
There was also an inquiry from the SEC early last month.
“DWAC received a voluntary information and document request from the SEC which sought, inter alia, documents relating to meetings of DWAC’s Board of Directors, policies and procedures relating to trading, the identification of banking, telephone and email addresses, the identities of certain investors and certain documents and communications between DWAC and TMTG,” the filing said.
The FINRA investigation actually predated the merger announcement.
As DWAC disclosed in the filing, in late October and early November it received information requests from FINRA “surrounding events (specifically, a review of trading) that preceded the public announcement of the October 20, 2021 Merger Agreement.”
All of these investigations could stall Trump’s media goals.
The SEC getting involved in this merger should come as no surprise since a launch of a new media company, and particularly social media, could rock the big tech boat.
The Hollywood Reporter said that the first product of this new media company would likely be “Truth Social,” which would probably be like a new version of Twitter.
TMTG estimated that it can attract 15 million monetizable users, and if it can add users beyond Trump’s base (an open question), it could become far larger. The company projected that Truth Social could have 81 million users by 2026.
These numbers do not come anywhere close to Twitter’s 211 million monetizable users, according to Statisa. But to have that many users in just 4 years could be viewed as a threat to all the establishment social media.
What makes the SEC investigations even more understandable is that they may have been pushed by Democrats.
Warren said the merge was “looking suspiciously like a scheme in which ‘the salesmen behind all of this should be fine, even if those who fall for their sales pitch get screwed.'”
Warren said she was concerned that DWAC and Trump’s company may have ignored some of the rules.
SPACS, like DWAC, “are required to disclose any direct or indirect conversations with potential target companies,” Warren wrote. “DWAC and Trump Media and Technology Group appear to have brazenly flouted these rules.”
Since when has Warren cared so much about SPACs following rules? SPACs have been on the rise in the market for the past 3 years, but it’s only when Trump’s media company gets involved with one that suddenly major lawmakers are concerned about the market rules.
This all seems to be a pretty thinly veiled attempt to simply slow down or stop Trump from successfully getting a media company up and running that could challenge the traditional giants of the industry.
Truth and Accuracy
We are committed to truth and accuracy in all of our journalism. Read our editorial standards.