Wall Street’s top financial regulators are investigating Donald Trump’s $1.25bn deal to float his new social media venture on the stock market, a filing showed on Monday.
Digital World Acquisition Corporation, the blank-check acquisition firm that agreed to merge with Trump Media & Technology Group Corp (TMTG), disclosed in a regulatory filing on Monday that the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (Finra) were looking at the deal.
Digital World said the SEC asked 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.
The SEC stated in its request that its investigation does not mean that the regulator has concluded that anyone violated the law, Digital World said.
TMTG did not respond to requests for comment.
The Massachusetts senator Elizabeth Warren had asked the SEC to investigate TMTG’s proposed merger with Digital World over potential violations of securities laws, including whether they had sufficiently disclosed when deal talks began.
The SEC declined to comment.
The investigations come amid excitement among Trump supporters and retail investors over the planned deal. Frantic trading of Digital World’s shares has driven TMTG’s valuation from $875m in October to close to $4bn.
Digital World, whose shares were down 1.8% to $44.14 on Monday, said Finra asked for details in late October and early November about “surrounding events”, including a review of trading, that preceded the announcement of the merger.
Finra said in its request its inquiry should not be construed as an indication that any violations of Nasdaq rules or federal securities laws have occurred, Digital World added.
Finra declined to comment.
TMTG said on Saturday it had entered into agreements to raise about $1bn from a group of unidentified investors, bringing the deal’s total proceeds to $1.25bn. But TMTG will receive the money only if the deal is completed. A vote required for Digital World shareholders to approve the transaction has yet to be scheduled.
Some on Wall Street have been reluctant to associate with Trump, and the Digital World filings did not disclose which investors backed the $1bn fundraising.
Trump was banned from top social media platforms after the 6 January attack by his supporters on the US Capitol amid concerns he would incite further violence. The Capitol attack was based on unsubstantiated claims of widespread fraud in last year’s presidential election.
Trump remains in legal jeopardy arising from both his lie that his defeat by Joe Biden was caused by electoral fraud and his financial affairs. His own personal worth has plummeted and the Trump Organization faces investigations in New York over its financial and tax affairs.
But Trump remains a vocal presence in national politics. On Monday he was in the headlines for an attack on the US press – which he called “crooked bastards” – in remarks to a conservative group at Mar-a-Lago on Saturday night.
In a rambling speech, Trump also said “big tech” was “horrible” and had “taken away our press, they have taken away a voice”.
Trump continues to send out statements, his chosen method of communication in lieu of the tweets by which he used to conduct much of his business.
In statements on Monday, Trump continued to complain about the revelation by his former chief of staff Mark Meadows, first reported by the Guardian last week, that Trump returned positive and negative Covid tests three days before his first debate with Biden last year.
In its first financial projections since the announcement of the merger, Digital World said it expected the average revenue per user of Trump’s planned social media app, Truth Social, to grow to $13.50 in 2026, with 81 million total users.
That is despite the app not having reached even trial mode. TMTG plans to launch the beta version of Truth Social in the first quarter of 2022.
Digital World also said it expected TMTG to reach 40 million total subscribers by 2026. By comparison, Twitter has more 200 million daily active users.