The public listing of former President Donald J. Trump’s social media company dealt a new blow on Monday when the cash-rich shell company merged with Mr. Trump’s. disclosed in a regulatory filing that a federal grand jury in New York recently issued subpoenas to the company and its directors.
According to Digital World Acquisition filings, a special purpose acquisition company, or SPAC, announced a merger with Trump Media & Technology Group last October. Following the merger, Trump Media will undertake the listing and trading of Digital World as a public company.
Digital World’s disclosure is the first indication that federal prosecutors in Manhattan have been involved in overseeing the merger between Digital World and Trump Media, which has been under investigation by financial regulators for months. . The investigation risks further delaying the completion of the merger, which would give Trump’s company and its social media platform, Truth Social, up to $1.3 billion in capital. , in addition to listing on the stock market.
Securities and Exchange Commission and Financial Industry Regulatory Authority open investigation within a few weeks of the merger announcement. Digital World filings on Monday said the grand jury subpoena sought information similar to what the SEC had requested.
The federal grand jury also sought “information regarding Rocket One Capital.” The filing does not reveal the information the grand jury wants about Rocket One, a venture capital firm in Miami.
In one submit a separate application, Digital World revealed that Bruce Garelick has stepped down as director. Mr. Garelick is on Digital World’s profile as Rocket One’s chief strategy officer.
Mr. Garelick did not immediately respond to a request for comment. The filing did not give a reason for his resignation.
The SEC investigation focused on whether there were serious discussions between the leadership of Digital World and Trump Media before the SPAC went public in September and why. those conversations are not disclosed in the specified file. SPACs, which raise money to go public in hopes of finding a merger candidate, must not have an acquisition goal in mind when they raise money from investors.
Regulators also require information about the unusual securities trading activities of Digital World before announcing the merger. There is a huge surge in trading of a Digital World Warrant – a security that gives the holder the right to buy shares at a later date and at a specified price – prior to the merger announcement.
Trump Media released a statement in response to Digital World’s revelation that it is “focused on reclaiming the American people’s right to free speech.” The company added, “We encourage – and will cooperate with – supervision in support of the SEC’s important mission of protecting retail investors.”
Subpoenas are often issued in connection with a potential criminal investigation. A spokesman for the US attorney in Manhattan, Damian Williams, declined to comment on the grand jury subpoenas issued to Digital World.
Trump Media’s Truth Social, a Twitter-like social media clone that Mr. Trump used to post the messages on and, after Slow start, has begun to gather followers, especially among conservatives and other supporters of the former president. Mr. Trump has banned from twitter in January 2021 after repeatedly posting messages claiming the 2020 presidential election had been stolen and failing to promptly report the January 6 attack on the Capitol building.
Elon Musk, billionaire businessman who made an offer to buy Twitter, has said he will allow Mr. Trump’s return to the much larger social media platform if he completes his deal. Mr. Trump has said he has no intention of returning to Twitter.
But a licensing agreement between Trump Media and the former president allows him to post messages about a political nature on Twitter or other social media platforms.
In the legal filing, Digital World said Truth Social “exists to provide users with a truly free speech platform and avoid being delisted by Big Tech.”
Mr. Trump is president of Trump Media, a title he is expected to retain if the merger is complete. Devin Nunes, a former Republican congressman from California, is the chief executive officer of Trump Media, which recently moved corporate offices to Sarasota, Fla.
It does not appear that anyone affiliated with Trump Media has received any subpoenas, according to Digital World records.
It is unclear how Rocket One Capital was drawn into the investigation. The venture capital firm is led by Michael Shvartsman, who did not return a request for comment. Immediately after Digital World revealed the grand jury subpoena, Rocket One took down the majority public website.
The parallel investigation by federal prosecutors and securities regulators comes as the clock ticks down to the September 8 deadline to complete the merger. The proposed merger agreement for allow the agreement period to be extended to 8 March 2023.
But the shareholders in SPAC is becoming more and more reluctant to extend the deadline to complete the merger as the stock prices of many SPACs have fallen in recent months.
Shares of Digital World, which closed last week at $27.82, were down more than 10% in early Monday trading. Shares are down more than 70% from their March peak, but are still $10 above the list price.
If the merger is not completed, Digital World will have to return the nearly $300 million raised in the IPO to shareholders. The $1 billion that dozens of hedge funds said they would invest in a completed deal will be dropped.
The underperformance of SPACs has resulted in a number of consolidation plans being canceled by agreement of the parties. The proposed agreement between Trump Media and Digital World allows the parties to agree to terminate the agreement.
Earlier this year, Trump Media raised about $15 million in funding from an unnamed group of investors.
Kitty Bennett Contributing research.
