Federal Regulators Investigating Trump’s SPAC Deal For New Social Media Platform

In October, former President Donald Trump announced that he would “stand up to the tyranny of Big Tech” with a new media venture that would include a social media platform called “TRUTH Social.” That new venture would purportedly compete with Facebook and Twitter, each of which had banned the former president following his incitement of the January 6 Capitol riot.

Trump, who had long relied on Twitter as a broadcast tool to reach his followers, remains banned from the respective services.

“President Donald Trump was happy with his ability to communicate with the public using Twitter, until they shut him down,” said Jeff Kagan, noted industry analyst for the wireless/telecom industry.

“That sent President Trump on a journey to find new ways to reach out and share his thoughts with the public,” Kagan explained via an email.

While this planned venture hasn’t shed any light on whether Trump would actually seek higher office once again, it does suggest that at the very least he wants to be part of the process, and have a platform to reach the masses. By launching his own social media service he wouldn’t need to fear that his measures would be blocked or even filtered.

“He wants to be a player,” added Kagan. “If he cannot use traditional social media like his Twitter account, then he will simply have to create his own. What is interesting is if he is successful, this may start a new social media avenue giving conservatives a way to share their thoughts about politics. We’ll just have to watch and see what happens next.”

However, there was a new twist on Monday, and it remains unclear as what exactly might happen next. The special purpose acquisition company (SPAC) that plans to merge with former President Trump’s new social media company revealed that the Securities and Exchange Commission (SEC), along with another federal regulator, had asked it for information regarding stock trading and communications with Trump’s firm that took place before any deal was announced.

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The investigations by the SEC and the Financial Industry Regulatory Authority (FINRA) were disclosed in an 8-K filing with the SEC by Digital World Acquisition Corp., the special purpose acquisition company on track to merge with Trump Media & Technology Group, CNBC.com reported on Monday.

Shares of Digital World had skyrocketed by as much as 1,657 percent in the days after the deal was announced, even as few details have been made public. As a result, the deal has drawn its share of scrutiny – and Democratic Senator Elizabeth Warren of Massachusetts was among those who had called for the SEC to investigate whether any laws were broken. At the time, however, Digital World repeatedly told shareholders that it had not held substantive talks with a target company – as SPACs are not supposed to have merger targets planned before they raise money from the public.

On Monday, Warren (@SenWarren) tweeted, “Nobody is above the law—and there may have been serious violations of securities laws during the propose merger of Digital World Acquisition Corp & Trump’s media company. I’m glad @SECGov and @FINRA are investigating.”

Digital World’s shares fell by 5 percent on Monday afternoon.

It remains improper for SPACs to discuss potential mergers before they go public, but it appears that the former president was talking about the deal with Digital World weeks ahead of that. Additionally, the company hasn’t revealed the names/affiliations of its investors which some consider unusual.

“The SEC and the FINRA are investigating potential irregularities in the merger between the SPAC Digital World Acquisition Corp (DWAC) and Trump Media & Technology Group,” explained technology analyst Charles King of Pund-IT. “Those issues include whether discussions occurred between the organizations that were not disclosed in SEC filings and trading activity that may have happened before the public announcement of the merger agreement.”

For its part DWAC has said it has been cooperating with the information requests and noted in its SEC filing that “the 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 SPAC made a similar note about FINRA’s request that its inquiry “should not be construed as an indication that FINRA has determined that any violations of Nasdaq rules or federal securities laws have occurred.”

This was probably not the type of announcement that Trump or the company wanted to see trending on social media.

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