Donald Trump’s media company, which first announced plans to go public through a blank-check corporation nearly two years ago, has faced serious scrutiny by US regulators investigating malfeasance in the earliest stages of the deal. But the path for Trump Media and Technology Group’s (TMTG) debut on the Nasdaq stock exchange finally cleared today after Digital World Acquisition Corp. (DWAC) settled charges of securities fraud.
The US government charged DWAC and its officials with illicitly holding merger talks with TMTG, the parent company of Trump’s Truth Social app, prior to its own initial public offering (IPO). This violates federal laws about how special purpose acquisition companies (SPACs) like DWAC can operate prior to its IPO.
“DWAC failed to disclose its discussions with TMTG and failed to disclose a material conflict of interest of its CEO and Chairman,” US Securities and Exchange Commission enforcement director Gurbir Grewal said in a press release announcing the charges. “In the context of a SPAC—a ‘blank-check’ entity without business operations—these disclosure failures are particularly problematic because investors focus on factors such as the SPAC’s management team and potential merger targets when making financial decisions.”
DWAC was fined $18 million but is allowed to complete its $300 million deal with TMTG, a deal that will finally take Truth Social’s parent company public.
The US government recently hit DWAC investors with insider trading charges
The settled charges come less than a month after the SEC and US Department of Justice brought charges against three men for illegally trading DWAC stock with the insider knowledge that the company would announce a merger with Trump’s media outfit. The trio allegedly made $22 million in the scheme; each now faces decades in prison if convicted.
Days after the charges were announced, DWAC said it had struck a tentative deal with the SEC to pay the $18 million civil penalty and complete the deal. The two companies now have until Sept. 8 to close their deal unless they receive approval from shareholders to once again extend the deadline.
Trump launched Truth Social in February 2022, one year after he was kicked off Twitter after using the platform to incite violence at the US Capitol on Jan. 6, 2021. Twitter has since sold to Elon Musk, who has invited Trump back to the platform, once his favored forum for reaching his political supporters.
But Trump has so far kept off of Twitter, limiting his posting to Truth Social. According to an SEC filing, Trump is contractually obligated to post first on Truth Social before any other platforms, though there is a carveout for his political activity.
DWAC has become something of a meme stock, as would-be investors in a Trump media company have waited patiently for the deal to close. The stock, which once hit $97 per share, rose 22% in after-hours trading from its current share price of $13.36 per share.