Financial regulators in the US are looking into the deal that would bring former president Donald Trump’s new social media company to the stock market.
The company partnering with Trump Media & Technology Group (TMTG) acknowledged the inquiries in a filing it made with regulators on Monday.
It also gave some financial forecasts for the company, which wants to rival Twitter and other platforms that banned Mr Trump after the January 6 Capitol riots, along with Netflix and other streaming video services.
It said over the weekend that it has lined up 1 billion dollars (£750 million) in investments from a group of unnamed institutional investors.
Separately, Trump Media announced that Devin Nunes, a Republican from California, will leave Congress to become the company’s chief executive in January.
Mr Nunes, the former chair of the House Intelligence Committee, was an ardent backer of Mr Trump during probes into Russian interference in the 2016 election and the president’s 2019 impeachment by the Democratic-led House.
The regulatory scrutiny is focused on the October announcement by Mr Trump’s media venture that it would merge with Digital World Acquisition Corp.
That company had launched on the US stock market three weeks earlier with the sole purpose of finding a privately held company to buy. It is often referred to by its trading symbol of DWAC.
DWAC said on Monday that it is cooperating with “the preliminary, fact-finding inquiries” by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Mr Trump dismissed the request for documents as a political attack on him.
“You know, this is just a continuation of witch hunts,” he said on the conservative channel Newsmax on Monday night. “Anything you do they want to look at it.”
The SEC early last month requested documents related to meetings of DWAC’s board and communications between DWAC and Mr 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”.
The SEC could be looking at whether DWAC and Mr Trump’s company had any conversations about a deal before DWAC’s own initial public offering of stock, said Jay Ritter, a professor at the University of Florida who is an expert on initial public offerings (IPOs).
Under rules for these companies, known as special-purpose acquisition companies (SPACs) they are not supposed to line up acquisition targets before selling their own shares.
Senator Elizabeth Warren on November 17 wrote a letter to the SEC’s chair, Gary Gensler, asking if the agency is exploring whether DWAC had violated the law by holding such discussions and misleading potential investors by failing to inform them before its IPO.
Asked how worried he would be about the SEC’s investigation if he were on the receiving end, Mr Ritter said: “It depends on what I knew. This could be innocuous or pro-forma stuff, or it could be really serious.”
DWAC and TMTG did not respond to requests for comment on Monday.
An SEC spokesperson declined to comment beyond saying: “The SEC does not comment on the existence or nonexistence of a possible investigation.”
Separately, FINRA asked in late October and early November for a review of trading in DWAC’s stock before the October 20 merger deal was announced.
That could be an indication of a search for insider trading, Mr Ritter said, though it is a notoriously difficult thing to prove.
The merger announcement sent shares of DWAC surging from 9.96 dollars to 94.20 dollars in just two days as Trump supporters and investors looking to make a quick buck piled in. The shares have since pulled back to roughly 44 dollars.
Such a lofty price indicates high expectations for Mr Trump’s media venture among at least some investors.
In its filing with regulators, DWAC also gave some financial forecasts for the company, which has yet to launch but wants to build a “non-cancellable” global community.
The presentation included forecasts that the company’s TRUTH Social service may have 81 million users by 2026, or nearly 7 million more people than voted for Mr Trump in the last US presidential election.