Former US President Donald Trump applauded during the annual convention of the National Arms Association (NRA) in Houston, Texas, USA, May 27, 2022.
Shannon Stapleton Reuters
A federal criminal investigation is threatening a proposed merger between former President Donald Trump’s social media company and a special purpose acquisition, a deal that will give the combined company access to billions of dollars in public markets.
The company, Digital World Acquisition Corp., revealed in a securities filing on Monday that it learned on June 16 that each member of its board of directors had received summonses from a federal grand jury in New York.
The grand jury wants similar documents that the Securities and Exchange Commission sought in its already open civil inspection, DWAC said. The company received the summons itself on Friday with similar requests, along with other requests related to communications, individuals and information, including Rocket One Capital.
DWAC also revealed on Monday that board member Bruce J. Garelik told management that he would resign from the board last Wednesday. Garelik said his resignation was “not the result of disagreement with Digital World’s operations, policies or practices,” according to company records. Garelik has been named chief strategic officer of Rocket One Capital. The company’s website was almost empty on Monday morning, saying, “The site will be available soon. Thank you for your patience!”
DWAC has warned that subpoenas and investigations by the SEC and the US Department of Justice could delay or even prevent its merger with Trump’s social media company. Shares of the company fell more than 9% to about $ 25 on Monday morning. Shares jumped above $ 90 in October after a deal was announced with Trump’s group.
DWAC did not respond immediately to a request for comment.
Development is the latest political headache for Trump. Following public hearings by the commission investigating the January 6 Capitol attack on Trump, Trump faces intense scrutiny over his alleged role in conspiracies to overturn the 2020 election results. He is also considering jumping into the race. The White House in 2024
The Trump Media & Technology Group announced in October that it had agreed to merge with DWAC with the ultimate goal of “becoming a publicly registered company subject to regulatory and shareholder approval.” This merger will give Trump’s company and its social media platform Truth Social more than $ 1 billion in capital and its own stock market listing. DWAC shares jumped at that time.
Trump Media did not immediately respond to a request for comment.
Trump’s campaign is run by former Republican Devin Nunes, who was one of Trump’s most loyal defenders in Congress. Trump Media’s Truth Social has already launched. The former president founded it as an alternative to Twitter, which banned it because of his tweets on Jan. 6, as he continued to spread the false story that his election had been stolen.
The revelations mark the latest problem for the so-called SPAC, which is a kind of fictitious company created to raise capital in the public stock markets with the ultimate goal of buying or merging with a private company.
Truth Social and its planned affiliation with DWAC hit hard from the start.
One of the first criticisms came from Sen. Elizabeth Warren, D-Mass., Who called on SEC President Gary Gensler in November that DWAC “may have committed securities breaches by having private and undisclosed discussions about the merger as early as May 2021.” while omitting this information in [SEC] submission and other public statements. “
Shares of DWAC lost more than half of their value in 2022. This is much worse than the poor performance of the broad market this year: the S&P 500 fell by a far less serious 18.2% over the same period.
CNBC’s Thomas Frank contributed to this article.
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