Shares of Digital World Acquisition Corp. (DWAC) slid on Monday after the special purpose acquisition vehicle said a federal grand jury in the Southern District of New York had subpoenaed the company’s board members seeking more details on its merger deal with former President Donald Trump’s tech and social-media platform.
DWAC stock fell 11% in the stock market today. The plunge left the stock at its lowest level since the merger deal — with Trump Media & Technology Group, the parent of the conservative social platform Truth Social — was announced in October.
The SPAC, which wants to take Trump’s company public, made the disclosure in a filing on Monday. It warned that the subpoenas, and investigations from the Justice Department and the SEC, risked slowing or squashing the merger deal altogether — echoing remarks in a filing earlier this month.
The disclosure marked the latest scrutiny of the merger deal, which has faced questions over due diligence and its compliance with securities law, following reports on correspondence with Trump prior to Digital World’s public debut. Meanwhile, Truth Social has faced technical difficulties and questions about its ability to compete with larger social-media platforms.
Subpoenas Threaten DWAC Stock
Digital World said it became aware of the grand jury subpoenas on June 16. It said the subpoenas seek similar details to those requested earlier by the SEC.
The SEC’s requests, Digital World said, were related to the company’s due diligence relating to Trump’s media company, and communications over potential deal targets other than Trump’s venture.
The agency is also seeking information on relationships between Digital World and entities “including ARC Global Investments II LLC, Digital World’s sponsor, and certain advisors, including Digital World’s underwriter and financial advisor in its initial public offering.”
Digital World also said the subpoenas sought other details on its filings, and information on Rocket One Capital. In the filing on Monday, the SPAC also disclosed that Bruce Garelick, Rocket One’s chief strategy officer, was resigning from Digital World’s board.
“We encourage — and will cooperate with — oversight that supports the SEC’s important mission of protecting retail investors,” Trump Media & Technology Group said in a statement in response to the disclosures.
DWAC stock also took a hit in April, following reports that its head of technology product development chief stepped down.
The SEC and Financial Industry Regulatory Authority, or FINRA, began looking into Digital World late last year.
Digital World, in a filing in December, said FINRA was asking for information “surrounding events (specifically, a review of trading) that preceded the public announcement” of the merger agreement with Trump Media on Oct. 20.
The New York Times reported that Trump and Patrick Orlando, Digital World’s CEO, had been discussing a deal months before the public debut of DWAC stock. Those discussions, the article and others noted, may have run afoul of securities law.
DWAC stock rocketed higher after the merger deal was announced. But experts raised questions about the speed at which that deal arrived following Digital World’s debut. Shares of Digital World began trading on Sept. 30.
Truth Social was launched after Trump was banned from Twitter (TWTR), following the Jan. 6 riot at the U.S. Capitol last year. Recent congressional hearings on the riots have put more focus on the former president’s actions during that time.
Truth Social launched in February. But some users cited glitches and difficulties creating accounts.
DWAC stock took a hit after Tesla (TSLA) CEO Elon Musk’s plans to buy Twitter gained traction. Musk has also said he wants to make Twitter a “free speech” haven, potentially siphoning off some of Truth Social’s audience.
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