© Reuters. File photo: On September 11, 2020, a sign can be seen outside the office of the Financial Industry Regulatory Authority (FINRA) in Manhattan, New York City, USA. REUTERS/Andrew Kelly
Authors: Noor Zainab Hussain and Greg Roumeliotis
(Reuters)-A document shows that the top financial regulator on Wall Street is investigating a deal in which former US President Donald Trump listed his new social media company for $1.25 billion.
Digital World Acquisition Corp, a blank check acquisition company that agreed to merge with Trump Media and Technology Group (TMTG), disclosed in Monday’s regulatory filing that the US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) are investigating the transaction .
TMTG did not respond to a request for comment.
Digital World stated that in early November, the SEC requested documents regarding communications between Digital World and TMTG, Digital World board meetings, transaction-related policies and procedures, bank identification, telephone and email addresses, and certain investor identities.
Digital World added that the US Securities and Exchange Commission stated in its request that its investigation does not mean that the regulator has concluded that anyone has violated the law.
U.S. Senator Elizabeth Warren asked the U.S. Securities and Exchange Commission to investigate the proposed merger of TMTG and Digital World for possible violations of securities laws, including whether they had fully disclosed information at the beginning of the transaction negotiations.
The US Securities and Exchange Commission declined to comment on Monday.
The investigation was conducted at a time when Trump supporters and retail investors were excited about the planned deal. The frantic trading of Digital World stock has pushed TMTG’s valuation from October’s 875 million U.S. dollars to nearly 4 billion U.S. dollars.
Digital World shares closed down 2.6% to $43.81 on Wednesday, saying that FINRA had asked for detailed information about “peripheral events” at the end of October and early November, including a review of the transaction before announcing the merger.
A Reuters review of transaction data revealed that there was unusual activity on October 20 before the merger was announced later in the day. According to data from Refinitiv, the transaction volume exceeds 1 million warrants with a total value of approximately US$500,000, compared with 119,000 warrants on October 19.
Digital World added that FINRA stated in its request that its investigation should not be interpreted as any indication of a violation of Nasdaq rules or federal securities laws.
FINRA declined to comment.
TMTG said on Saturday that it had reached an agreement to raise approximately $1 billion from a group of unidentified investors, bringing the total proceeds of the transaction to $1.25 billion.
But only after the transaction is completed, TMTG will receive the money. The voting required by Digital World shareholders to approve the transaction has not yet been scheduled.
Some people on Wall Street are reluctant to contact Trump, and Digital World’s documents did not disclose which investors supported the $1 billion financing.
After his supporters attacked the U.S. Capitol on January 6, Trump was barred from accessing top social media platforms for fear that he would provoke further violence.
The attack on the Capitol was based on unsubstantiated accounts of fraud that prevailed in the presidential election last year.
With the exception of Trump’s appointment as chairman of TMTG, the company did not confirm any decision until it announced on Monday that Devin Nunes would resign as the representative of the United States and joined its CEO position in January. Executives.
Nunez, the top Republican of the House Intelligence Committee, has been one of Trump’s staunchest allies in Congress.
In its first financial forecast after announcing the merger, Digital World stated that it expects that the average revenue per user of Trump’s social media application TRUTH Social will increase to $13.50 in 2026, with a total number of users of 81 million.
Although the application has not yet reached trial mode. TMTG plans to launch a beta version of Truth Social in the first quarter of 2022.
Digital World also stated that the total number of TMTG users is expected to reach 40 million by 2026.In contrast, social media platforms Twitter Company (NYSE:) There are more than 200 million active users every day.