Digital World Acquisition Corp. (DWAC) announced in a recent filing that it had received questions from the United States government regarding its planned merger with Trump Media & Technology Group (TMTG). TechCrunch here covered SPAC’s planned merger with the company associated with former US President Donald Trump.
We were largely skeptical of the deal, the product’s goals, and the overall vibe. Several things have happened since:
- In late October, the New York Times reported that Trump was in conversation with DWAC CEO Patrick Orlando before the creation of SPAC. “In doing so, Mr. Orlando’s PSPC may have circumvented securities laws and stock market rules, attorneys said,” according to the Times.
- The DWAC and TMTG entered into “subscription agreements for $ 1 billion of committed capital to receive upon completion of their business combination” on Dec. 4, according to a statement.
It is not surprising, given the two pieces of news, that the Financial Industry Regulatory Authority, or FINRA, and the Securities and Exchange Commission (SEC) in the United States have questions.
According to the new DWAC repository (emphasis added):
DWAC has received some preliminary requests for information from regulatory authorities, with which it is cooperating. Specifically, in late October and early November 2021, DWAC received a request for information from FINRA, regarding the events (in particular, a negotiation review) leading up to the public announcement of the May 20 merger agreement. October 2021. According to FINRA’s request, the investigation should not be interpreted as an indication that FINRA has determined that violations of Nasdaq rules or federal securities laws have taken place, nor as a reflection on the merits of the securities involved or on any person who has traded in such securities. Besides, in early November 2021, DWAC received a voluntary request for information and documents from the SEC which requested, among others, documents relating to meetings of the DWAC Board of Directors, policies and procedures relating to trading, identification of bank, telephone and email addresses, the identities of certain investors and certain documents and communications between DWAC and TMTG. According to the SEC’s request, the investigation does not mean that the SEC has concluded that someone has broken the law or that the SEC has a negative opinion of DWAC or any person, event or security.
The company points out, as you read, that it has not been charged with wrongdoing. Still. But that’s a lot of scrutiny for a deal that was difficult to analyze, that has our heads tilted to one side at a pretty sharp angle.
TMTG / DWAC’s investor presentation was sparse. And it quickly became apparent that some of the code used to create the TMTG TRUTH Social product was not correctly sourced. It’s a little whimsical, frankly.
Why PSPC was going to merge with what seemed to be more of a collection of ideas than a business was a question. How the evaluation of this one was decided was also a mystery. So is the list of investors who put together the $ 1 billion injection for the deal.
The whole case isn’t good for PSPCs, which are already gaining some attention given their somewhat confusing mechanism that allows a pre-product company to go public through a less mature structure. than what is generally allowed. This is the kind of deal that gave SPACs – the blank check companies – the name they had until recently, when they got some sort of rebranding for a short window of time. eyes of investors.
More to come on this one.