U.S. financial regulators investigate Trump social media deal
Noor Zainab Hussain and Greg Roumeliotis
Wall Street’s top
financial
regulators
are investigating former
U.S
. President Donald
Trump
‘s $1.25 billion
deal
to float his new
social
media
venture on the stock market, a filing showed.
Digital World Acq
uis
ition Corp, the blank-check acq
uis
ition firm that agreed to merge with
Trump
Media
& Technology Group Corp (TMTG), disclosed in a regulatory filing on Monday that the
U.S
. Securities and Exchange Commission (SEC) and the
Financial
Industry Regulatory Authority (FINRA) were probing the
deal
.
TMTG did not respond to req
ues
ts for comment.
Digital World said the SEC asked for documents in early November relating to communications between Digital World and TMTG, meetings of Digital World’s board, policies and procedures relating to trading, the identification of banking, telephone, and email addresses and the identities of certain investors.
The SEC stated in its req
ues
t that its investigation does not mean the regulator has concluded that anyone violated the law, Digital World added.
U.S
. Senator Elizabeth Warren had asked the SEC to
investigate
TMTG’s proposed merger with Digital World over potential violations of securities laws, including whether they had sufficiently disclosed when
deal
talks began.
The SEC declined to comment on Monday.
The investigations come amid excitement among
Trump
supporters and retail investors over the planned
deal
. Frantic trading of Digital World’s shares has driven TMTG’s valuation from $875 million in October to close to $4 billion.
Digital World, whose shares ended trading on Wednesday down 2.6% at $43.81, said FINRA had asked for details in late October and early November about “surrounding events,” including a review of trading, that preceded the announcement of the merger.
A Reuters review of trading data showed unusual activity on Oct. 20 ahead of the merger’s announcement later that day. Over 1 million warrants, worth a total of around $500,000, were traded, compared with only 119,000 warrants on Oct. 19, according to Refinitiv data.
FINRA said in its req
ues
t that its inquiry should not be construed as an indication that any violations of Nasdaq rules or federal securities laws have occurred, Digital World added.
FINRA declined to comment.
TOTAL PROCEEDS
TMTG said on Saturday it had entered into agreements to raise about $1 billion from a group of unidentified investors, bringing the
deal
‘s total proceeds to $1.25 billion.
But TMTG will receive this money only if the
deal
is completed. A vote required for Digital World shareholders to approve the transaction has yet to be scheduled.
Some on Wall Street have been reluctant to associate with
Trump
, and the Digital World filings did not disclose which investors backed the $1 billion fundraising.
Trump
was banned from top
social
media
platforms after the Jan. 6 attack by his supporters on the
U.S
. Capitol amid concerns he would inspire further violence.
The Capitol attack was based on
uns
ubs
tantiated claims of widespread fraud in last year’s presidential election.
With the exception of
Trump
being named TMTG chairman, the company had not identified any of its top executives until Monday, when it announced that Devin Nunes would step down as a
U.S
. representative to join as its CEO in January.
Nunes, the top Republican on the House Intelligence Committee, has been one of
Trump
‘s staunchest allies in Congress.
In its first
financial
projections since the announcement of the merger, Digital World said it expected the average revenue per user of
Trump
‘s
social
media
app, TRUTH
Social
, to grow to $13.50 in 2026, with 81 million total users.
That is despite the app not having reached even trial mode. TMTG plans to launch the beta version of Truth
Social
in the first quarter of 2022.
Digital World also said it expected TMTG to reach 40 million total s
ubs
cribers by 2026. comparison,
social
media
platform Twitter Inc has over 200 million daily active users. –
Reuters