The cash-rich special-purpose acquisition firm, which has a pending deal with former President Donald J. Trump’s media business, announced Monday that it has closed a deal. reached a provisional settlement It held discussions with securities regulators over the investigations that hampered the merger.
The Securities and Exchange Commission is investigating whether preliminary merger talks between SPAC, Digital World Acquisition Corporation and Trump Media & Technology Group violated federal securities laws. The interim settlement requires Digital World to pay fines and amend some of its previous filings to comply with the law.
Digital World said in a regulatory filing that Trump Media suggested it might be hesitant to go ahead with the merger if it wasn’t completed by Sept. 8, but SPAC said He added that he “remains very interested in a deal” with Trump Media. And hoped that the two companies could work out their differences.
If Trump Media, the parent company of Truth Social, pulls out of the deal, it will be a bitter pill to swallow for Digital World shareholders. Many of them are individual investors, who have been waiting nearly 21 months for the merger to complete.
Representatives for Trump Media did not respond to a request for comment.
Digital World has announced that it will pay an $18 million fine and amend certain regulatory filings to comply with federal securities laws under an interim settlement with the SEC.
SPACs are set up to raise money from investors to find companies to acquire, and are not allowed to have serious merger talks before going public. These speculative investment firms have limited time to complete the merger before returning the cash they raise to their investors. Federal officials were trying to determine whether discussions with Digital World and Trump Media ahead of the September 2021 initial public offering were substantive enough that the SPAC should go public before selling its shares to the public. .
In its IPO, Digital World raised $300 million from investors. In a subsequent private placement, dozens of hedge funds agreed to invest up to $1 billion in the combined company. However, due to long delays in completing the merger, many hedge funds pulled out of their financing deals. Without additional concessions from the company, it is unclear whether the private placement would still be valid.
As part of the interim settlement, which requires SEC commissioner approval, DigitalWorld found that the company “violated securities laws with respect to certain statements, agreements, and omissions relating to securities transactions,” and issued a “stop order” with regulators. announced that it would be closed. Timing and discussion that the company did with TMTG. “
Digital World’s stock price soared to about $97 at one point, but then plummeted amid all the regulatory delays. The stock, which is mostly owned by about 400,000 individual investors, closed at just $12 on Monday.
In another investigation that has clouded the prospects of the merger, last week federal prosecutors in Manhattan and the SEC indicted three men on insider trading charges who made about $22 million in deals before the merger was announced in October 2021. , seemed to be resolved. Another was an early investor before Digital World went public, and another was a former director of SPAC.
Trump Media officials were not involved in the insider trading allegations.
If Digital World fails to finalize deals with Trump Media and other companies by September 8, Digital World will send $300 million raised in an IPO that recently asked shareholders to approve an extension to current shareholders. need to return. , but you’ll need 65 percent of them to follow suit.
Digital World said in a regulatory filing Monday that Trump Media was not a party to the interim settlement and had not yet agreed to a deal with the SEC. You are asked to agree to a settlement of the investigation.
Digital World also quoted Trump Media as saying in a recent email that they are “currently only bound by the merger agreement through Sept. 8, 2023.” Digital World called this a “difference of interpretation” between Digital World and Trump Media.
For months, executives at Trump Media and some Digital World shareholders have accused the SEC of using the investigation as an excuse to run out of time without approving the merger.
It’s unclear where Trump Media will fund its operations if it exits. The company’s Twitter-like social media platform, Truth Social, has millions of users and is Trump’s main outlet for expressing his views.