Digital World, the Special Purpose Acquisition Instrumental Company (SPAC) accompanying Donald Trump’s new media adventure, is in the spotlight. The SPAC revealed this week that it is the subject of an investigation by Wall Street financial regulators, including the Securities and Exchange Commission (SEC, federal agency) after raising a billion dollars for Trump Media & Technology Group, the name that receives the new business of the former Republican president. Investor identity is investigated as if it were a matter of state: buying access to Trump may amount to setting the rules of the game in national politics.
Digital World explained that the SEC requested in early November documents related to communications between Digital World and Trump Media, minutes of the meetings of the SPAC board of directors, as well as the identification of bank, telephone and email addresses and especially the identities of certain investors in the deal. Trump’s startup confirmed on Saturday that Digital World had raised $ 1 billion, without identifying members of the “diverse group of institutional investors” behind it.
SPACs are companies created in order to raise sufficient capital to carry out a merger or acquisition with an existing one, listed or not, or for any future purchase opportunity. In the US they are commonly known as “blank check companies”. As Digital World stressed, the SEC made clear in its request for documentation that the ongoing investigation does not presume that it violated the law. But Digital World shares, which skyrocketed – from $ 9.96 a share to $ 94.20 in two days – when the merger with Trump’s company was announced, tumbled this week to a low on Wednesday. 2.6% below previous earnings, priced at $ 44.97.
Trump’s notoriety and the decidedly political purposes of his new business venture – waiting to be known if he runs for the White House in 2024 – have raised both financial and partisan suspicions. Trump Organization, the Republican’s family emporium, is the subject of several investigations for irregularities and tax fraud. But the political dimension of his new business bet also weighs. Democratic Sen. Elizabeth Warren once asked the SEC to investigate Trump Media’s merger with Digital World for allegedly violating the legislation. Columnist Tim O’Brien warned this week in Bloomberg about the unknown identity of the investor who has placed the billion dollars, pointing out that buying access to Trump is a threat to national security, especially if the Republican runs again for the presidency .
“Trump is a disinformation kingpin exiled from the main social media platforms,” O’Brien recalled, referring to the closure of his Twitter and Facebook accounts after the assault on the Capitol in January. “The identities of investors who just put a billion dollars in their path are of interest because anyone who is able to win favor with Trump could influence public policy. [si vuelve a la Casa Blanca]. What if countries like Saudi Arabia or others in the Middle East have decided to invest? It is not a hypothetical question “, emphasizes O’Brien, who cites the case of the investment firm recently created by Steven Mnuchin, who was Secretary of the Treasury with Trump,” with Saudi and other Gulf countries financing. “
Suspicions center on the negotiation between both parties this spring. Patrick Orlando, CEO of Digital World, met with Trump representatives in April, five months before the SPAC sold the stock package to investors. Orlando then managed other SPACs, and, according to an investigation by the newspaper The New York Times, it was not clear who he was representing in the video conference with Trump’s delegates. The head of the Trump Media legal team said the call was “strictly a negotiation” between the former president’s company and Benessere, another SPAC that Orlando managed.
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SPACs can sell their shares to the public in limited offers, as long as they do not have any acquisitions in progress. In a presentation held in September, Digital World stated that the company and its executives had not engaged in any “substantive discussions, directly or indirectly” with any company. However, the deal with Trump Media was announced a few weeks later.
The SEC has been expressing its concern about the proliferation of SPACs, without taking any action in this regard. In other words, it has never penalized a SPAC for planning a deal before selling shares, but the consequences of doing so could be very serious. “The deal [con Trump Media] it will probably collapse if the SEC sues ”Digital World, said Thomas Gorman, who worked seven years for the federal agency, to The New York Times.
One of Digital World’s shareholders also has pending accounts with the SEC. ARC Group, a Shanghai-based company that tried its hand at various businesses before deciding on SPACs, is one of the main sponsors of Digital World and also participated in the April video conference with representatives from Trump Media. ARC was more inclined to merge with Benessere, but the executives of that SPAC did not want to do business with Trump. ARC then headed to Digital World, whose reins Orlando had just taken over.
Suspicions about Digital World are not stopping Trump Media’s expansion plans. After California Congressman Devin Nunes, a prominent supporter of the former president, announced his resignation from the seat to take over the new media company, the company released its far from modest growth forecast on Monday: 81 million users on its network. Social Truth, called Truth Social, by 2026, and another 40 million paying users for the projected streaming.
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George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.