Trump SPAC faces grand jury investigation

Placeholder while loading article actions

The company that plans to merge with former President Donald Trump’s social media company has received subpoenas from a federal grand jury, a setback that could complicate Trump’s plans to take his company to the public market.

The company, known as Digital World Acquisition Corp., disclosed the subpoenas in a Securities and Exchange Commission filing dated June 24 and warned that it “may delay, hinder or prevent the completion” of the agreement. If the combination goes through, Trump’s firm could have access to more than $1 billion committed by investors.

The grand jury is at least the third investigative entity to review Trump’s special purpose acquisition company (SPAC) deal, after the SEC and the Financial Industry Regulatory Authority opened their own investigations.

Digital World Acquisition did not immediately respond to a request for comment.

The Trump SPAC was flooded with cash soon after its launch, but its share price has fallen since the app launched. It slid 9.6% on Monday to close at $25.15; in comparison, it was trading above $97 in early March.

According to the filing, the grand jury requested some of the same documents that the SEC requested. They include information about communications “with or about multiple people” and information about a Miami-based investment firm called Rocket One Capital. Also on Monday, the company announced the resignation of a DWAC executive who is described as a Rocket One executive.

Representatives for Rocket One could not immediately be reached. The Company’s website appears to visitors as being under maintenance.

Trump had touted Truth Social, his new social network, as a rival to big tech companies, giving him unchallenged space to deliver his thoughts and build an alternative to what he sees as “the liberal media consortium.” In addition to the social network, Trump Media & Technology Group has touted plans for a subscription streaming service spanning news, entertainment and podcasts.

The launch of the social network at the beginning of the year was marked by major setbacks. The website remained entirely inaccessible for the first few days of its debut due to technical issues, a 1 p.m. outage and a waiting list of 300,000 people, raising questions about its viability. The app has since seen its downloads plummet, losing investors, executives and attention.

A SPAC is a front company created to take a private company public by merging with it. They are called “blank check” companies because investors can buy shares without knowing which company SPAC will eventually acquire.

While SPACs in their current form have been around since the early 2000s, their popularity has exploded in recent years, attracting celebrities such as Shaquille O’Neal, Jay-Z and Trump. But they have also sparked regulatory scrutiny, frustration from investors who have suffered losses and market repudiation.

The agreements had become an alternative means of accessing public contracts. But SPACs have been hit particularly hard by the recent market downturn, as investors turn away from riskier bets and regulators have proposed new rules to strengthen disclosure requirements and investor protections.

An index that tracks SPAC’s performance, the De-SPAC Index, fell more than 60% for the year, compared to the roughly 19% drop in the benchmark S&P 500.

DWAC has lost more than half of its value so far this year.

Before Wall Street downgraded on SPACs, there was immense interest in investment vehicles because they can save companies and investors time and money. Stakeholders can bypass the traditional IPO process and strike quickly, taking advantage of dramatic upside market swings.

After the initial economic shock at the start of the pandemic, a SPAC investment frenzy took off, attracting hedge funds and retail investors rushing for the next moneymaker amid the financial chaos spawned by the crisis. public health.

Lance B. Holton