Former US President Donald Trump has again come under the spotlight as his new media company deal is being investigated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (Finra). The Republican politician seems to be attracting attention for controversial dealings, and this time he is under the radar of Wall Street.
Trump engaged in a new social media venture on the stock market, which has prompted financial regulators to investigate his $1,25 billion deal. The deal was erected after merging Digital World Acquisition Corporation and Trump Media & Technology Group Corp (TMTG).
On Saturday, TMTG announced that it would engage unidentified investors in various agreements that would raise about $1 billion. Under the agreed-upon terms, TMTG would receive the money after their deal was completed, and a vote to release those funds was yet to be scheduled.
Linkage with Trump is problematic, especially for media companies. He was banned from popular social media platforms for inciting people to riot. He is blamed for using his social media pages with a large following to spread political propaganda that fuelled the Capitol riots on 6 January. Due to this, he faced lawsuits over purporting that Biden cheated in the 2020 elections, and his organization is under investigation for financial mishaps and tax invasions.
On Monday, Digital World Acquisition Corporation disclosed that SEC and Finra were looking into their deal on public forums. According to the company, SEC requested “for documents in early November relating to communications between it and TMTG, meetings of its board, policies, and procedures relating to trading, the identification of banking, telephone, and email addresses and the identities of certain investors” [Source].
In making such requests, SEC did not suggest that anyone had violated the law, so it was simply looking into the deal, as noted by Digital World. TMTG decided to keep quiet about this issue for the moment and did not respond to the media.
Reports noted that Massachusetts senator Elizabeth Warren triggered the wave of investigation after asking SEC to launch an investigation into “TMTG’s proposed merger with Digital World over potential violations of securities laws, including whether they had sufficiently disclosed when deal talks began.” SEC also declined to comment when approached by certain media houses.
Such an investigation undermines the joy in Trump’s camp whereby they were celebrating the deal, which meant more finances for them, especially for the retailers. Financial reports depicted that “Frantic trading of Digital World’s shares has driven TMTG’s valuation from $875m in October to close to $4bn,” proving that a deal of this magnitude was a good move by TMTG as it has benefited within a short space of time, and projections were foreseeing significant improvements going into 2022.
Digital World also revealed that on Monday, Finra approached it and asked for information from late October and early November. This information was related to “surrounding events,” and it included trading reviews before the merger was announced. Finra shared the same sentiments with SEC, suggesting that their inquiry did not indicate that illegal activities had taken place. It also refused to comment on this investigation.
Because he can no longer use his social media accounts, Trump was inspired to launch his social media app [Source], Truth Social, and the merger with Digital World in this plan was projected to increase the value of Truth Social to $13,50 by 2026 after it has amassed about 18 million users. TMTG is expected to launch a beta version of the app in 2022.
Despite SEC and Finra stating that there is no indication of a violation of laws, an investigation of this nature probably shakes the merger of these companies.