The company planning to buy Donald Trump’s new social media business has disclosed a federal grand jury investigation that, it says, could impede or even prevent its acquisition of the Truth Social app.
Shares of Digital World Acquisition dropped 10 percent in morning trading on Monday as the company revealed that it had received subpoenas from a grand jury in New York.
The Justice Department subpoenas follow an ongoing probe by the Securities and Exchange Commission into whether Digital World broke the rules by having substantial talks about buying Trump’s company starting early last year before Digital World sold stock to the public for the first time in September, just weeks before its announcement that it would be buying Trump’s company.
Trump’s social media venture launched in February as he seeks a new digital stage to rally his supporters and fight Big Tech limits on speech, a year after he was banned from Twitter, Facebook, and YouTube.
The Trump Media & Technology Group, which operated the Truth Social app and was being acquired by Digital World, said it will cooperate with “oversight that supports the SEC’s important mission of protecting retail investors.”
The new probe could make it more difficult for Trump to finance his social media company. The company last year got promises from dozens of investors to pump $1 billion (nearly Rs. 7,800 crores) into the company. Still, it can’t get the cash until the Digital World acquisition is completed.
Stock in Digital World rocketed to over $100 (nearly Rs. 7,800) in October after announcing its deal to buy Trump’s company. The stock traded at around $25 (about Rs. 2,000) in morning trading on Monday.
Digital World is a special-purpose acquisition company, or SPAC, part of an investing phenomenon that exploded in popularity over the past two years.
Such “blank-check” companies are empty corporate entities with no operations, only offering investors the promise they will buy a business in the future. As such, they can sell stock to the public quickly without the usual regulatory disclosures and delays, but only if they haven’t already lined up possible acquisition targets.
Digital World said in a regulatory filing on Monday that the Southern District of New York grand jury has subpoenaed each board of directors member. The grand jury and the SEC are also seeking several documents from the company and others, including a sponsor, ARC Global Investments, and Miami-based venture capital firm Rocket One Capital.
Some of the sought documents involve “due diligence” regarding Trump Media and other potential acquisition targets, as well as communications with Digital World’s underwriter and financial adviser in its initial public offering, according to the SEC disclosure.
Digital World also Monday announced the resignation of one of its board members, Bruce Garelick, a chief strategy officer at Rocket One.
