NEW YORK – Shares of Digital World Acquisition Corp. were down 10% in morning trading Monday as the company reported that subpoenas and a related investigation by the Justice Department and the Securities and Exchange Commission over the acquisition of the maker of Trump’s Truth Social app.
The Justice Department subpoenas follow an ongoing SEC investigation into whether Digital World broke the rules by engaging in substantial talks about buying Trump’s company, beginning early last year before Digital World went before it in September. First sold shares to the public just weeks before announcing it would buy Trump’s company.
Trump’s social media venture was launched in February as he seeks a new digital stage to rally his supporters and fight Big Tech’s limits on speech, a year after he was banned from Twitter, Facebook, and YouTube.
The Trump Media & Technology Group — which operated the app and was about to be acquired by “blank check” firm Digital World — said it will work with “supervisors that support the SEC’s important mission to protect private investors.”
The new probe could make it harder for Trump to fund his social media company. The company received promises from dozens of investors last year to pump $1 billion into the company. Still, it won’t get the money until the Digital World acquisition is complete.
Shares in Digital World skyrocketed to over $100 in October after announcing the deal to buy Trump’s company. The stock was trading at just around $25 in the morning trade.
Digital World is a special acquisition company or SPAC, part of an investment phenomenon that has exploded in popularity over the past two years.
Such blank check companies are empty business entities with no operations and only offer investors a promise that they will buy a company in the future. As such, they can sell shares quickly to the public without the usual regulatory disclosures and delays, but only if they haven’t already set up potential acquisition targets.
Digital World said in a regulatory filing Monday that a grand jury in New York’s Southern District has subpoenaed each board member. The grand jury and the SEC also seek documents related to the company and others, including a sponsor, ARC Global Investments, and Miami-based venture capital firm Rocket One Capital.
According to the SEC’s disclosure, some documents sought to involve “due diligence” regarding Trump Media and other potential takeover targets and communications with Digital World’s underwriter and financial advisor on its first public offering.
Digital World also announced Monday the resignation of one of its board members, Bruce Garelick, a chief strategy officer at Rocket One.