The Securities and Exchange Commission on Thursday reached a settlement with a cash-rich shell firm that was planning to merge with former President Donald J. Trump’s social media company, potentially clearing the way for a long-delayed deal. announced that there is Under the settlement, Digital World Acquisition Corporation will pay $18 million in liquidated damages and amend certain company filings to comply with federal securities laws. The SEC was investigating whether Digital World violated merger laws governing special purpose acquisition companies.
The SEC has accused special-purpose acquisition company Digital World of misleading investors with its disclosures.
“These failures to disclose are particularly problematic because investors look to factors such as the SPAC’s management and potential merger goals when making financial decisions,” said SEC executive director Gerbil S. Grewal. will be,” he said.
Digital World announced an interim settlement earlier this month in a regulatory filing.
However, many hurdles remain for Digital World to complete its merger with the Trump Media & Technology Group. Trump Media & Technology Group is the parent company of Truth Social, a Twitter-like platform that has become the former president’s primary megaphone for reaching supporters online.
Digitalworld, which raised $300 million from investors in its September 2021 initial public offering, faces a Sept. 8 deadline to complete a deal with Trump Media or else liquidate and cash out. are forced to return the This week, SPAC announced plans to seek shareholder approval to extend that deadline, but Trump Media has yet to indicate any intention to keep the pending deal alive beyond Sept. 8.
Shortly after Digital World and Trump Media announced their agreement to merge in October 2021, the SEC launched an investigation into whether preparatory talks between the parties violated federal securities laws.
Shell companies are established to raise funds from investors and find companies to acquire, but full-scale merger talks are not permitted before listing. Such companies have a limited amount of time (usually two years for him) to complete the merger before they are asked to return the cash they have raised to their investors.
Last month, federal prosecutors in New York indicted two brothers and three former Digital World directors for participating in a scheme that generated $22 million in illegal trading profits ahead of the proposed merger.
Digital World this week set a deadline of Aug. 17 to get at least 65% of its 400,000 shareholders to approve the extension to give it more time to complete the merger. But when Digital World secured a similar extension last year, it took months of voting to get enough shareholders to approve the move.
The majority of Digital World’s shareholders are individual investors, many of whom are former presidential supporters and active users of Truth Social. The merger would provide Trump Media with immediate cash to fund Truth Social’s operations. It is unclear why Trump Media did not promise to give the Digital World time to complete the merger.
