The regulatory questions focus on the October announcement by Trump’s media venture thatit would merge with Digital World Acquisition Corp. That company had launched on the US stock market three weeks earlier with the sole purpose of finding a privately held company to buy. It’s often referred to by its trading symbol of “DWAC.”
DWAC said Monday that it is cooperating with “the preliminary,fact-finding inquiries” by the Securities and Exchange Commission and the Financial Industry Regulatory Authority.
The SEC early last month requested documents related to meetings of DWAC’s board,trading policies and communications between DWAC and Trump’s media venture,among other things. According to DWAC,the SEC’s request said the commission’s “investigation does not mean that the SEC has concluded that anyone violated the law or that the SEC has a negative opinion of DWAC or any person,event,or security.”
The SEC could be looking at whether DWAC and Trump’s company had any conversations about a deal before DWAC’s own initial public offering of stock,said Jay Ritter,a professor at the University of Florida who is an expert on IPOs. DWAC is sitting on about $US293 million in cash raised through its IPO.
Under rules for these blank-cheque companies,known as special-purpose acquisition companies,or SPACs,they’re not supposed to line up acquisition targets before selling their own shares. Senator Elizabeth Warren on November 17 wrote a letter to the SEC’s chair,Gary Gensler,asking if the agency is exploring whether DWAC had violated the law by holding such discussions and misleading potential investors by failing to let them know about it before its IPO.
Asked how worried he would be about the SEC’s investigation if he were on the receiving end,Ritter said,“It depends on what I knew. This could be innocuous or pro-forma stuff,or it could be really serious.”