SPAC at it again... with the federal inquiries. The SEC and FINRA are investigating a planned merger between former President Trump’s media company and Digital World Acquisition Corp. (DWAC), the special-purpose acquisition company that plans to take it public. Refresher: Trump wants to rival Big Tech and build a “non-cancellable global community” with Trump Media & Technology Group (TMTG). Trump’s still barred from Twitter, Facebook, and YouTube.
- On Monday, DWAC disclosed that in October regulators had requested info on trading and comms that happened before the TMTG deal was announced.
- Potential issue: Trump reportedly met with DWAC’s CEO before the SPAC had raised money. SPACs aren’t supposed to have a target identified when they initially fundraise, so the meeting could violate SEC rules if found to have represented substantive deal talks.
- DWAC said that regulators' requests indicated that there’s been no determination of wrongdoing.
What the DWAC... DWAC shares dipped 11% on the news, but rebounded 17% yesterday. When the merger was announced, DWAC shares quadrupled and it became the most traded stock on major exchanges that day. We still don’t know the identities of TMTG’s execs — besides GOP Rep. Devin Nunes, who’s set to become CEO — or the identities of investors who’ve committed $1B. What we do know:
- Social network + streamer (in theory): TMTG says it plans to launch "Truth Social" next year to compete with social giants, plus a “non-woke” Netflix rival.
- Big ambitions: TMTG forecasts $3.7B in revenue by 2026, though some of its growth projections seem contradictory.
SPAC scrutiny is rising… Companies that go public via SPAC sometimes face less oversight than those that IPO, but they’re still held to regulatory standards. SPACs have raised as much money as traditional IPOs this year. Now regulatory heat is growing to keep tabs. EV startup Lucid recently got an SEC subpoena about projections made as part of its mega-SPAC merger. And Nikola said it would pay $125M to settle an SEC probe related to statements made by its founder.