With former U.S President, Donald Trump hoping to break away from the tech giant’s alleged monopoly with the launch of his social media company and app, regulators are scrutinizing the deal that would bring the new social media offering from Trump into the stock market.
The Trump Media and Technology official partner, Digital World announced the filings it made with regulators on Monday, while notifying the public about some financial forecasts for the new company.
Techbooky recalls that Trump had in October launched his new company, Trump Media & Technology Group, and had unveiled plans for a new messaging app called “Truth Social” to rival Twitter and the other social media platforms he had issues with culminating in his ban.
TMG over the weekend said it has lined up $1 billion in investments from a group of unnamed institutional investors.
Trump Media has now announced that Devin Nunes, a Republican party Rep from California will become the new Chief Executive of TMG effective from January 2022. Nunes a former chairman of the House Intelligence Committee will leave Congress to assume the new role next year. A fervent Trump loyalist, Nunes stood by the former President during probes into Russian interference in the 2016 election and his 2019 impeachment by the Democratic-led House.
Regulators are beaming their light on the October announcement by Trump’s media venture on its merger with Digital World Acquisition Corp (DWAC), with the company three weeks earlier launching on the U.S. stock market with the intention of finding a privately held company to buy.
The Securities and Exchange Commission (SEC) has in November requested documents related to meetings of DWAC’s board 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.”
DWAC on Monday affirmed that it is cooperating with “the preliminary, fact-finding inquiries” by the SEC and the Financial Industry Regulatory Authority, but Trump sees the scrutiny and request for documents as a witch hunt and a political attack.
He had said on Newsmax on Monday night:
“You know, this is just a continuation of witch hunts. Anything you do they want to look at it.”
According to Jay Ritter, a professor at the University of Florida who is an expert on IPOs, part of the SEC scrutiny will be to determine whether DWAC and Trump’s company had prior conversations about a deal before DWAC’s own initial public offering of stock.
Part of the rules for special-purpose acquisition companies (SPACs) is that they are barred from lining up acquisition targets before selling their own shares. This may have prompted Senator Elizabeth Warren to have written a letter on November 17 to Gary Genser, the SEC’s chairman inquiring if SEC is investigating whether DWAC had violated the law by holding such discussions and misleading potential investors by failing to inform them before its IPO.
On if he would lose sleep 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.”
Just what the regulators are probing is not clear. What’s more, the regulatory rules on SPAC discussions with targets are gray, prohibiting only “substantive” talks with possible acquisition targets.
An October report from popular journal, New York Times had revealed that DWAC CEO, Patrick Orlando met with TMG representatives before taking DWAC public, with several SPAC experts noting that the three weeks it took for DWAC to find and strike a deal with TMTG was unusually fast.
An SEC spokesperson when probed on the matter by newsmen declined to comment beyond saying, “The SEC does not comment on the existence or nonexistence of a possible investigation.”
The Financial Industry Regulatory Authority (FINRA) had in October asked for a review of trading in DWAC’s stock before the announcement of the Oct. 20 merger deal, in what could be an indication of a search for insider trading according to Ritter, though it’s a notoriously difficult thing to prove.
The merger announcement sent shivering excitement among Trump supporters and interested investors, with DWAC’s stock surging from $9.96 to $94.20 in just two days. The shares have since pulled back to roughly $44. On Monday, the shares closed down 2.6% at $43.81. This surge indicates high expectations for Trump’s media venture among at least some investors.
DWAC in its filing with regulators also gave some financial forecasts for the company, which has yet to launch but wants to build a “non-cancellable” global community. It had forecasted an 81 million user on the TRUTH Social service by 2026, or nearly 7 million more people than voted for Trump in the last U.S. presidential election, but this may be seen as an exaggeration as SPACs are generally known for giving very optimistic forecasts about their future growth in presentations to investors.
According to the filing, TMTG is projected to generate nearly $3.7 billion in revenue, more than the annual revenue of retailer Restoration Hardware, RV maker Winnebago Industries and entertainment giant iHeart Media, which owns more than 800 radio stations.
The presentation also forecasted the monthly fee per user to be $9 in 2026 for the TMTG+ video service that will stream “non-woke” entertainment and news.
Nunes in his acceptance speech as CEO said: “The time has come to reopen the Internet and allow for the free flow of ideas and expression without censorship.”
Ayoola Faseyi, an Abuja based Journalist with interest in Technology and Politics. He is a versatile writer with articles in many renowned News Journals.He is the Co-Founder of media brand, The Vent Republic.
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