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US regulators probe Trump social media Spac deal

US regulators are investigating Digital World Acquisition Corp, the blank-cheque company set to merge with Donald Trump’s social media start-up, seeking information on trading before the deal was announced as well as dealings between the two groups.

The Securities and Exchange Commission in November requested documents about the special purpose acquisition company’s board meetings as well as information on trading policies, investors’ contact details and communications between Digital World and Trump Media and Technology Group, according to a filing by the Spac released on Monday.

US broker-dealer watchdog Finra has also asked Digital World to share information on trading ahead of the merger’s announcement, the filing said.

Digital World said in the filing it was co-operating with regulators and that their information requests did not suggest they had determined wrongdoing had occurred.

Trump’s company, which includes a social network called Truth Social, a podcast unit and a streaming business, said on Saturday it had raised $1bn from unidentified investors. On Monday, the former US president’s “non-woke” entertainment group disclosed a series of bold projections claiming that by 2026 it would generate $3.7bn in revenues off of 81m users.

The rosy forecast is primarily based on TMTG developing a streaming service called TMTG+, which Trump believes will compete with Netflix and Disney Plus — services that have lured hundreds of millions of subscribers.

“The American public is seeking ‘non-woke’ entertainment,” according to a presentation on the company’s website. The presentation features photos of the former president handing a trophy to a Sumo wrestler and a theme park with the headline “stop wondering, start wandering”. 

Trump projects that his streaming service will reach 40m subscribers by 2026. By contrast, Fox Nation, the streaming service launched by Lachlan Murdoch’s Fox News aimed at conservative audiences, is estimated to have signed up fewer than 1.2m paying subscribers since launching in 2018.

Trump hired Scott St John, a former game show producer, to run the streaming service. St John has produced shows such as NBC’s “Deal or No Deal”, in which contestants choose from a group of sealed briefcases to win cash.

Trump launched Truth Social, a social media platform with no existing app or website, in October. The former president remains banned from several big tech platforms, including Twitter, Facebook and YouTube, following the January 6 attack on the US Capitol.

The investigations come amid a flurry of probes into companies that have opted to list via Spacs, as US regulators fret they may have side-stepped oversight typically applied to traditional initial public offerings.

Lucid Motors, an electric car group taken public in one of the largest Spac deals in history, on Monday disclosed that it had received a subpoena from the SEC, while the regulator in July fined Stable Road Acquisition Company and its sponsor Brian Kabot over its merger with Momentus Inc, a space infrastructure company, for misleading characterisations.

Gary Gensler, SEC chair, has said there were “risks inherent to Spac transactions, as those who stand to earn significant profits from a Spac merger may conduct inadequate due diligence and mislead investors”.

The SEC declined to comment. Finra did not immediately respond to requests for comment.


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